Industry gives cautious welcome to Cadbury-Kraft

Industry experts have given a cautious welcome to Kraft’s agreed takeover bid for Cadbury to create a “leader in the global foods and confectionery sector.”

Cadbury’s acceptance of a takeover offer from Kraft comes after five months of the UK’s largest confectioner giving the US food giant the brush off.

The hostile takeover bid has been the topic of much speculation and finally came to a head earlier this morning after a round of midnight discussions.

Industry experts say that while the outcome looks favourable for Cadbury, the way the company is run must be scrutinised.

Graham Hale, managing director at Interbrand, says: “Kraft is on the charm offensive at the moment, but it must remember the actual customer as well as the shareholder. There needs to be some evident degrees of reassurance, especially with this being such a big topic in the headlines. Foreign chocolates aren’t always favoured, so the promises made have to be communicated in an acknowledgeable manner.”

Mano Manoharan, joint managing director at branding consultancy LFH, adds: “Kraft needs to drive out costs and improve margins in order to make the necessary return to justify the £12bn Cadbury price tag. That must be done sensitively in order to ensure brand asset equity is not harmed/destroyed. And key marketers are not demotivated and therefore leave.”

Part of the way of doing this will involve ensuring that promises to keep the best of both worlds includes keeping familiar inventory.

Manoharan adds: “That means brands and key personnel are ‘ring fenced’ and protected – whilst behind the scenes, so to speak, distribution, production and print costs are ruthlessly challenged and rationalised.”

According to brand valuation business Brand Finance, the value of the Cadbury brand could increase by at least a quarter following a successful integration into the Kraft business.

However, Siegel+Gale chairman Tom Blackett, cautions that the deal looks set to be a “clever brand play” by Kraft to stretch its business and it must now make the “right noises to convince both shareholders of permanent value and customers that their favourite chocolates are here to stay without modifications.”

Laura Haynes, chairman of Appetite, adds: “Both companies have very good senior management but are different in terms of the way they view business and what they represent. Kraft must have the upmost respect for Cadbury and strive to ensure they work well together. The overall corporate branding they do to promote the takeover will also be of huge interest.”

For others, it was the fact that Cadbury would now be owned by a US firm that was particularly worrying.

Julian Reiter, MD of Positive Thinking, says: “I’m horrified by the fact that Kraft have taken over such a great British institution as Cadburys. I think they are going to have to be very careful with their management of this story. Whilst it may be great value for shareholders in the short term – and certainly for bankers, advisors and no doubt the chief exec- what does this mean long term for jobs and our cherished brands?”

“It’s possible that we’ll see what happened to Terry’s when Kraft took them over – Terry’s York manufacturing going to Kraft facilities in Sweden, Belgium, Poland and Slovakia. And with $7bn of debt being taken on to finance this latest move, will they follow Manchester United’s purported fate of asset-stripping by Americans who have no interest in UK jobs or UK brands. Don’t get me wrong. I am no jingoist, but I do worry when we seem happy to sell off all our utility and manufacturing industry – core long term infrastructure make up of our economy – to foreign conglomerates.”

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