Food Fight in the Cookie Aisle -- Hydrox vs. Oreo Turns 'Cutthroat'

By Annie Gasparro

To protect his latest investment, Ellia Kassoff has filed a complaint with the Federal Trade Commission, publicly accused his biggest competitor of foul play and rallied his customer base. "We want to get Congress involved," he says.

His business: creme-filled chocolate sandwich cookies.

Mr. Kassoff, who owns Hydrox, is waging an uphill battle against his nemesis, Oreo, as he tries to reclaim prime territory on grocery shelves.

"The cookie business is pretty cutthroat," he says.

Hydrox had disappeared in 2008, but Mr. Kassoff thought bringing it back would be a sweet investment. He bought the dormant trademark for just $275, re-created the recipe, then relaunched the cookie in a blaze of nostalgia-fueled publicity in 2015. Some 4,000 supermarkets began stocking them.

Gradually, the cookie's prospects crumbled. Today, only a few hundred stores stock them, and they are sold mostly on Amazon.com.

Mr. Kassoff's version of what went wrong features a villain: Big Cookie. Oreo and its owner Mondelez International Inc., he claims, threw around their weight in the cookie aisle to push Hydrox aside on supermarket shelves.

"The Oreo guys saw us as a threat, so they started hiding our cookies on shelves to get us discontinued," Mr. Kassoff says. "It got to the point where I'd had enough, so we filed an official complaint with the Federal Trade Commission in August."

Nonsense, says a Mondelez spokeswoman. "Much of our shelf placement is due to the fact that Oreo is the No. 1 cookie in the U.S., and retailers typically align premium placement to the fastest-selling products, based on consumer demand. We always operate with integrity, and we are proud to be America's favorite cookie."

Mr. Kassoff hasn't heard back from the FTC. The agency hasn't responded to requests for comment.

Sunshine Biscuits, now defunct, introduced Hydrox cookies in 1908. The Hydrox name came from combining the words hydrogen and oxygen, which Sunshine executives thought would evoke purity.

Nabisco responded with its rival Oreo in 1912. A more appetizing name and stronger marketing helped Oreo build a dominant market share. Nabisco made Oreos kosher in 1997, a blow to the kosher Hydrox, then owned by Keebler Foods Co.

Kellogg Co. bought Keebler in 2001 and discontinued Hydrox in 2003. Fans pleaded with Kellogg to bring Hydrox back, which it did for a few months in 2008 to mark the cookie's 100th anniversary. Then it was gone.

Mr. Kassoff had fond memories of Hydrox. "I grew up in a kosher household," he says, "and Hydrox was the only cookie allowed in our house."

His investment firm, Leaf Brands LLC, had relaunched other discontinued goodies, including cone-shaped candy Astro Pops and fruit-flavored Wacky Wafers. After buying the Hydrox trademark, Mr. Kassoff worked with food scientists and former suppliers to re-create the recipe.

Some Hydrox die-hards were elated. Jim Thebado helped taste-test the new cookies. He had saved a single cookie for years in his freezer with a note that said "do not touch." When he died at age 84, a year after Hydrox's return, his son tucked the original cookie in a box of memorabilia they buried with him.

Grocers, Mr. Kassoff says, also were game. In 2016, the relaunched cookie rang up about half a million dollars in sales, Mr. Kassoff says, and by 2017, they were in stores including Kroger and Walmart. Still, it remained far behind Oreo, with had about $2 billion in annual global sales.

Mr. Kassoff says he began to get troubling reports from shoppers and brokers that his cookies weren't where they were supposed to be in stores. He says he visited some stores to get to the bottom of it. At one, he says, a Ralphs store in California, Mondelez's Nutter Butter cookies were in the slot he had paid the chain's owner, Kroger Co., to stock with Hydrox.

"We were supposed to be next to the Kroger sandwich cremes," Mr. Kassoff says. The store manager found the Hydrox on a top shelf, where shoppers were less likely to see them. The manager peeled back the clear plastic marking on a lower shelf of Nutter Butters to find a sticker for Hydrox cookies underneath, Mr. Kassoff says.

Some customers noticed that their favorite cookie appeared to have been hidden away. Jeff Pekar says he contacted Hydrox to report that the cookie had disappeared from the Kroger near his home in Katy, Texas. "When they did have them, they were pretty well hidden," he says.

It is standard practice in the grocery business for leading food companies to help decide where their products should go on store shelves. Many grocery companies rely on "category captains" -- the leading sellers of particular products -- to submit plans for how shelf space should be apportioned among their products and those of competitors.

In addition, many big manufactures hire their own people to stock the shelves, giving rise to accusations that they sometimes ignore the plans and shove competing products aside.

"They call it the shelf wars," says one broker who sells snacks and candy to national supermarket chains.

Mr. Kassoff recalls the Ralphs manager telling him: "The Mondelez guys are screwing with you." Kroger, the parent company of Ralphs, declined to comment.

Mr. Kassoff says shenanigans in the aisle sabotaged the Hydrox revival. Sales began to fall and stores including Walmart and Kroger notified him they were discontinuing the cookies.

It is common for grocery stores to discontinue products that aren't selling well. It is possible that the Hydrox fan base was just smaller than Mr. Kassoff thought. He acknowledges that a lot of people in their 20s and 30s have never heard of them.

In a Facebook post last August, his company tried to enlist Hydrox fans to fight back: "We need your support by calling your local supermarket's cookie buyer at their corporate offices, (not asking the store manager) and telling them you want Hydrox in their stores."

Mr. Kassoff hopes to get the cookies back into stores using the more expensive direct delivery method that Mondelez and other big manufacturers employ. Mr. Kassoff says he won't stop making Hydrox cookies, even if he has to sell them exclusively in bulk online.

"We aren't going to give up," he says.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

January 17, 2019 11:05 ET (16:05 GMT)

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