Cadbury + Kraft: Good or Bad?

Britain’s well-loved confectioner company has been sold to the devil.. or at least that is what employees in Cadbury feel today. In an unexpected change of events, America’s Kraft took over British-originated Cadbury in a hostile takeover. Initially unsuccessful after Cadbury’s shares were rated lesser than what its Chairman thought it was worth, the deal fell through in January 2010 for a total of £11.5billion or $18.9billion.

The start of Cadbury, manufacturer of the delicious chocolates we eat on a daily basis, was in the early 19th century. John Cadbury began to vend tea, coffee and drinking chocolate, which he made himself, in Birmingham, England. He then moved into producing a variety of cocoas and drinking chocolate. And in 1854, chocolate was made. And the rest, as they say, is history.

In 2008, Cadbury had a total revenue of £5, 384 million. However, early 2010 saw this Cadbury being taken over by the US giant, Kraft, which is the largest confectionary, food and beverage company headquartered in the US. So what does this merger do to these companies and to the people?

Initially this takeover had not been supported by the shareholders and the Chairman of Cadbury. But as Kraft later acquired a larger stock in Cadbury, and offered a higher price, Cadbury Chief Executive, Todd Stitzer, bowed down to Kraft. This is an unfortunate event for the employees of Cadbury, especially those who work at the manufacturing plant at Keynsham, UK, which is expected to be shut down soon. This takeover can lead to a loss of a number of jobs in the UK. Not just that, there is also fear that the headquarters of Cadbury-Kraft would be shifted to the United States, a disappointment for lovers of Cadbury chocolates in the UK.

This merger can in fact, have a detrimental effect on the UK economy, which is the last developed country to be coming out of recession. The merger can lead to loss of more jobs, and an increase in the country’s unemployment figures, which, in turn, can lead to a decline in the rate of economic growth. In terms of growth of the UK, this takeover isn’t going to see too many positive results.

If we look at how this merger will pay off for Kraft, it can actually go either ways for the company. Considering the huge reputation and goodwill that Cadbury comes with, if Kraft is able to make full use of the potential, then they are definite to go places! However, there can be another aspect to that as well. If Kraft brings about changes to the products or in the recipes of the chocolates, it will surely not be well received by the public, which will only lead to Kraft’s downfall.

So will Kraft-Cadbury succeed to the extent they hope to? All we can do now is wait and watch how the company handles the media limelight, the employees current wrath, and the public expectations of their products.

Rashmi Krishna Kumar