How Oreos and Reese’s Became Partners

Mondelez has been cooperating with Hershey. Each has something the other wants.

An Oreo Reese Partnership

Mondelez and Hershey believe that by combining an Oreo with a Reese’s Peanut Butter Cup they could wind up with an irresistible snack. But it got more difficult from there. They had to figure out how to place the Reese’s taste in a cookie “sandwich.” And perhaps even more challenging, Reese’s needed to get the Oreo taste in its cup.

WSJ tells us that Hershey needed 35 different versions of the cup to get it right. The problem was getting the right ratio among the chocolate, peanut butter, Oreo cookie, and cream layer. It took nine months. Still though, the two sweet makers refused to give each other any of its secret recipes.

As you might expect, they needed lawyers that detailed each one’s intellectual property. They even needed to specify how much Oreo powder would be in the Reese’s mixture. Top secret, the Hershey project was called Powerplay while Mondelez chose Project Snoopy (because of the Peanuts connection).

Combining the two was more difficult as each snack maker tried to retain its identity while adding the new taste:

Our Bottom Line: Joint Ventures

A joint venture could develop because two companies have different products or processes that complement each other. Or, two similar firms could form a pair to increase their market power.

Sometimes, when firms pool their resources, they can achieve goals that they alone could not attempt. During the 1990s, McDonald’s wanted to expand to the former Soviet Union. But they needed to establish what we could call a joint venture with the government. Only then could the communist government benefit and control the initiative. Correspondingly, to enter the former Soviet Union, McDonald’s (Canada) had to use the government as its “gateway” to resources. Elsewhere also, two groups need each others’ expertise or they want to share risk. Typically though, by expanding their market, they can achieve economies of scale and reduce cost.

Thinking of a charger network for electric vehicles, a collaboration made sense for 7 automakers (Honda, Hyundai, BMW, GM, Stellantis, Kia, Mercedes Benz). Also the Concorde, the only supersonic commercial jet was jointly developed and run by Britain (British Airways) and France (Air France). But perhaps most memorably, we initially had Pixar working with Disney before Disney acquired its partner. You can see that some of these deals were temporary and others rather permanent.

And now, we have Oreos and Reese’s.

My sources and more: Thanks to WSJ for inspiring today’s post. Then, for more on joint ventures,  Investopedia had a good summary.