Oreos to Hydrox: Resistance Is Futile

(FORTUNE Magazine) – It's a familiar story: A small, fledgling company comes up with a great new product--so great that a bigger, more powerful company copies the idea. The larger firm flexes its superior distribution and promotional muscles, the smaller outfit watches helplessly as its business slips away, and that's that--another case of the strong running roughshod over the weak.

You may not realize it, but it was this type of incident that gave rise to the modern chocolate sandwich cookie market. The common perception is that Oreos are the genuine article and Hydrox the generic knockoff, but the truth of the matter is precisely the opposite: Hydrox debuted in 1908, the signature product of the nascent Sunshine Biscuits, and ruled the category until 1912, when National Biscuit (later Nabisco) launched the remarkably similar Oreos. Given Nabisco's superiority over Sunshine in everything from distribution channels to advertising budgets, it was no contest--Hydrox never had a chance. Over the years, Oreos' popularity and market hegemony became so overwhelming that the product transcended the consumer realm and came to be viewed as a cultural icon, an American original--even though there was nothing original about it.

Hydrox partisans tend to be fiercely loyal, but Sunshine never attracted enough of them to mount a serious challenge to the Oreo juggernaut. Sales numbers from 1998 tell the story: $374 million for Oreos; $16 million for Hydrox. That's all about to change, however, if the folks at Keebler have anything to say about it. The elf-associated bakery acquired Sunshine in 1996 and, after a careful review process, is now bringing Sunshine's cookies under the Keebler brand umbrella. Most of the products will simply get a packaging revision, but Keebler decided that the Hydrox situation called for more drastic measures. The cookies themselves have been given a kid-oriented design face-lift, with an updated flavor formulation to follow this spring. The biggest change, however, is the name: Hydrox will henceforth be known as Keebler Droxies.

The demise of the Hydrox brand name (a smaller logotype of which is being retained on Droxie packages for a short transitional period and will be retired for good in April) marks the end of what is surely one of the more unusual stories in the annals of American snack-food marketing. Back in 1908, Sunshine's founders were looking for a product name that would evoke purity and goodness. After deciding that water was the purest thing they could think of, they drew upon water's atomic elements--hydrogen and oxygen--to come up with Hydrox. Alas, as Keebler's market research has confirmed, this is a much better way to name a cleaning fluid than a cookie.

"We had very negative feedback on the name, even from loyal consumers," says Carolyn Burns, Keebler's marketing director for cookies. After toying with a few replacement monikers, including Hydihos, Hydunks, Twisters, and Choco Twists, Keebler settled on Droxies. "Not only does it cue back to 'Hydrox,'" explains Burns, "but it's a fun, whimsical name that really works with the Keebler imagery." Fair enough, although I think it's actually more fun to think about what Keebler could have done had it stuck with Hydrox (imagine an ad with those elves poring over the periodic table: "Hydrogen and oxygen are uncommonly good elements....").

In any case, it'll take more than a new name to compete with Oreos, and nobody realizes this better than Burns, who's been entrusted with the thankless task of challenging one of the most phenomenally successful products on the consumer landscape. "We're up against a giant, and we know that," she says. "Obviously we have to look for ways to differentiate Droxies, because we have no intention of going up against Oreos head- on." When asked how she plans to differentiate her cookie from its extremely similar, far more popular rival, she takes a long pause. "Candidly," she finally says, "that's something we're working on. And we're not there yet."

Unfortunately for Keebler, the product's unique selling point--that it was the first, the original, the real deal--is now moot in a world that long ago anointed Oreos the king of the category. "According to our research," Burns explains, "not only is that claim [of Hydrox predating Oreos] not meaningful to consumers, it's not even credible. People don't believe it--they think Hydrox are the knockoff of Oreos, not the other way around."

The big irony there, of course, is that some consumers may now mistakenly think that Droxies are a knockoff of Hydrox--a generic of a generic--leaving the product with an even bigger image problem than it had before. All of which reinforces one of the business world's crueler lessons: Sometimes it just doesn't pay to have a good idea.

PAUL LUKAS, author of Inconspicuous Consumption, obsesses over the details of consumer culture so you don't have to.