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The Story of Oreos
5 min read

The Story of Oreos

The Story of Oreos

I recently came across the story of Oreos - and it is quite fascinating. Did you know that Oreos is not the original and is a copycat?

It seems that back in the day, biscuits were made for one reason - as food for sailors. It was made out of Flour, Salt, and Water and it was so hard, that you wouldn't dare bite into it. It was always had either soaked in water or soaked in milk. But it served its purpose as it was all of the same shape - which meant it was easy to pack and it lasted for a long time.

How Biscuits Started Off - Sailor Biscuits

Over time, as steamships and railways started to emerge, the need for sailor biscuits dwindled. And bakeries started making what they called Soft cakes - which essentially became cookies. Cookies had sugar added to them, and in some cases also butter and was positioned as something for the well-to-do classes. Soon enough it became a thing.

The Year was 1882

One of the prominent players in the US - two brothers, started the Loose Biscuit Company (Joseph Loose and Jacob Loose) and they realized that the only way to keep up with demand was to go the way that seemed trendy back then - to become a conglomerate and do an integrated supply chain. So they hired a lawyer to create a - what would be now called merger. 30 odd bakeries from around the area were merged into a single company called the American Biscuit Company which would buy lands and lease them to farmers with prices pre-negotiated so that they can have control over the price of inputs.

The problem is, they were so successful, that two other conglomerates were formed - The New York Biscuit Company & United States Biscuit Company. Soon enough, all three of them were competing within the same market, that the price of biscuits and cookies as a category fell by 40% and they were all operating on razor-thin margins.

The stress of it, got the older brother - Joseph Loose to become ill, so he stepped down and let his brother take charge. Jacob Loose with the lawyer they had hired, took the call to bring peace about this industry and create a consolidation of the three conglomerates. Unfortunately, the lawyer who was preparing all the papers named himself as president with extraordinary powers, and when the new entity - the National Biscuit Company was formed (1898), found himself running the show. The Loose Brothers had a nightmare - they had lost their company.

The Loose Brothers decided to start a new company of their own and started the Loose-Wiles Biscuit factory, and needed a new product to break away from the commodity market that cookies had become. They added chocolate to create a cookie. That became the base for the new product.

The price of cookies thanks to the war between the three conglomerates had become so low, that adulteration was very high. Most companies were using sawdust in cookies to keep up with those prices. That led to the Pure Foods and Drug Act in the US, that food has to be without adulteration and the ingredients to be listed on the box.

The Loose Wiles Company and several others saw water as being pure and using Hydrogen and Oxygen, there was a slew of food products named invariants of those. The Loose-Wiles Company named their biscuit Hydrox - and it was the original chocolate biscuit, with vanilla cream in between.

Hydrox Biscuits ruled the roost and the National Biscuit Company (later renamed as Nabisco) was on the run. They created their own version - the copycat, named Oreo. But Hydrox had a loyal following, and used only high-quality ingredients, compared to Oreo (that used Pig Fat for a long time).

But then suddenly one day Joseph Loose passed away. And a year later, his brother did. The last remaining partner, Mr. Wiles kept it going as long as he could. He renamed it Sunshine Biscuits. But then was sold off and has exchanged quite a bit of hand since then.

Nabisco saw that people when they ate an Oreo had the habit of taking the two halves apart and created a campaign around taking the biscuits apart and seeing which side the cream would land on, or people licking the cream, or people taking apart a biscuit and giving one half to another to share (this whole idea of sharing, was what sparkled Coca Cola's campaign as well).

That campaign, and the fact that Hydrox biscuits were without captains to drive it, is what made Oreos the success that they are today.

There are folks who are trying to bring back Hydrox biscuits, it seems, but when you say chocolate biscuits with a cream in between, what the world instantly remembers is Oreos. Isn't it?

The Original Hydrox Cookies

Lessons :

  1. Legal might be complicated and hard to understand, but make sure you know what is being done (ask your lawyer and a second lawyer to explain each clause). Read the legal documents before signing.
  2. Product is one part. Distribution beats Product advantage most of the time.
  3. Brand, Marketing, and Messaging have a big role to play in the success of a product and company.
  4. It takes a dramatic evolution of mindset and way of working as a company goes from product research and validation to initial traction to scale. I think the Loose-Wiles brothers kept saying that they are the originals and never bothered to do messaging as Nabisco did (sadly most folks believe Oreos are the original now).
  5. It is unfortunate that they didn't patent the recipe, the shape of the cookie, the structure (two chocolate cookies with cream in between) back then.
  6. Oreo plays a masterful game when it comes to collaborative creation. Oreo is consumed as much in volume NOT in the cookie form - as mix in the milkshake, in cream, yogurt, etc. It has become a "flavor".
  7. It is also said that Nabisco fiercely guards (and often sabotages) shelf space and pays to get prime shelf space in stores. Their restockers are known to turn the packages of competing products on shelves so that customers don't see them. It reminds me of how Uber used to Sabotage Lyft. B2C Markets are cut-throat.
  8. I would attribute Oreo's success in the marketing campaign to one single thing - understanding customers. The fact that their advertising and marketing team watched how consumers interacted with their product and used that back, resonated. It is a valuable thing to use the words that consumers and customers who are using the product describe and engage with the product back to them. Most of us make the mistake of trying to force-feed our "vision" of what it should be trying t get them to parrot - and fail.

What is your observation? Does first-mover even make a difference, or being a fast follow with brilliant execution trump that?

If you are an aspiring entrepreneur looking for a Startup Idea, Check out this Twitter thread, where I've been posting an Idea a week for the past year - that's over 52 of them! You can read the whole post and also ask me questions if you become a Tribe Member.

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