Cheers Kraft Cadbury blend

Cheers Kraft Cadbury blend

The Financial Times

By Greg Farrell in New York

September 16 2010

The chief executive of Kraft Foods said

the integration of Cadbury, which it

acquired this year for $19bn, is on track

and predicted that the combined company

would generate organic revenue growth of

5 per cent or more next year.

Irene Rosenfeld told analysts that the

company would realise $1bn in revenue

synergies by 2013, over and above the

$750m in cost synergies that it had

promised investors earlier.

“We feel terrific about the integration of

Cadbury,” said Ms Rosenfeld in an

interview with the Financial Times. “Onethird

of Kraft’s top management is from

Cadbury.”

Ms Rosenfeld said that Kraft would deliver

organic growth – despite economic

headwinds in its home market – by

building its brands through advertising.

“Brand value is more important than it’s

ever been,” she said. “The consumer is

value conscious, not just price conscious.”

Tim McLevish, chief financial officer, told

analysts the company was planning to

increase the percentage of revenues spent

on marketing from its current level of 8 per

cent to the 9 to 10 per cent range.

Ms Rosenfeld told analysts that

divestitures of recent years, combined with

the acquisition of LU and Cadbury, had

repositioned Kraft in the global snack

category, where margins tend to be higher

than in the packaged food business.

The Cadbury deal puts Kraft in a stronger

position to take advantage of growth

opportunities in developing markets such

as Brazil, where snack consumption is

expected to grow along with rising gross

domestic product, she said.

The company believes that the

combination of high-margin snacks and

strong regional brands will be the primary

drivers of growth. Ms Rosenfeld said that

snacks and regional power brands – which

include Oscar Meyer and Miracle Whip in

the US and Jacobs coffee in Europe –

would account for 75 per cent of the

company’s portfolio and 90 per cent of its

growth as it seeks to achieve 5 per cent

compound annual growth over the next

three years.

Some analysts expressed scepticism about

the growth numbers, especially in North

America, where consumer spending

continues to lag as a result of the recent

recession and continued high

unemployment. The company said its

global strength, the result of the Cadbury

deal, would help offset weakness at home.

Kraft shares rose 54 cents to $31.59 on

Wednesday. It is up 12 per cent since July.

Our Brands are Loved but our company Isn't - Kraft

THE TIMES Monday September 13 2010

The UK president of Kraft is battling to restore his company's reputation after the Cadbury controversy; writes Peter Stiff

The welcome was almost overwhelming, Women danced, men beat drums and children edged closer to watch a bespectacled Western businessman drink the traditional palm wine home brew. That he introduced himself using his local name, Kwabena, merely charmed the residents of the remote Ghanaian village even more.

You had to wonder whether Nick Bunker would have received as happy a reception in, for argument's sake, Bristol. Here, the president of Kraft Foods UK and Ireland would have been associated less with providingjobsthanwiththe closure of the nearby Cadbury plant at Somerdale and, perhaps worse, with reneging on an earlier promise to keep it open.

To this day Kraft insists that its initial promise was sincere and that only later in its controversial purchase of Cadbury, which became public almost a year ago, did it find out that it was too late to keep the factory open. It has left the American food giant with an uphill battle in winning over Cadbury's staff, the public and the British authorities.

"The biggest problem was that people didn't know Kraft," Mr Bunker said, reflecting on the negative comment at the time of the £11.5 billion takeover, which was sealed at the start ofthe year. "People know and love our brands but not the company. The fact we'd been in the UK for 85 years, employed 1,500 people in the UK and had a big coffee factory in the UK wasn't understood."

Mr Bunker added that he was not particularly close to the deal, that it was run largely out of Kraft's American head office, but in any case, he prefers to look forward, not back. "What I'm trying to do going forward is work on the concept that deeds are more important than

words." The most significant is the recent reorganisation of the combined company's office' infrastructure and the closure of its Gloucestershire HQ. "It was a sad day for Cheltenham and for the people who have lived and worked there for many years; equally, it was a

big day for Bournville." The historic home of Cadbury is to become a big research and development centre, but jobs in Cheltenham will belost. Mr Bunker is determined to persuade as many colleagues as possible to move from one to the other and says that most of the Cheltenham based Kraft contingent understand why the decision was made. Mr Bunker himself will split his time between Bournville and Uxbridge, where Cadbury has existing commercial operations.

His promotion in March was a reward for rising through Kraft's ranks in Britain, the Middle East Ce~tral Europe and the company's regional headquarters in Switzerland, not to mention -in the words of his bosses -transforming Kraft's performance in the UK. "I couldn't be prouder to be chosen to run the Cadbury and Kraft business in the UK and Ireland and I'm very well aware of my responsibility of being a guardian of brands with such heritage.

"I grew up with Cadbury as well, I used to spend my pocket money on a Curly Wurly when I was young, so I have a connection to the brand."

He has his connection, too, with Ghana. Mr Bunker was born in the capital Accra, where his father worked as an army doctor. That local name Kwabena is one given to children born on a Tuesday. He claims a "tremendous connection" to the country, where he says his family shared their happiest days, albeit leaving him with relatively few memories, since they returned to England when he was a baby.

But his visit to West Africa is more than a mere walk down memory lane. Here hundreds of smallholders come together to supply most of the cocoa that goes into Cadbury's chocolate sold in the UK. Indeed, with the quality and taste of cocoa beans varying depending on where they are from, Cadbury's chocolate would taste different ifthe company bought elsewhere.

His company is committed to investing about £30 million over ten years to support sustainable cocoa communities in Ghana, educating farmers on how to get better yields from their crop, supplying credit to enable them to develop their businesses and helping them to become Fairtrade-certified, enabling them to receive a premium for the cocoa they produce.

Mr Bunker believes that one ofthe great similarities between Kraft and Cadbury is their approach to sustainability, noting Kraft's launch of Britain's first certified coffee in 2004 and Cadbury making the Dairy Milk brand Fairtrade, a move that he applauded from afar at the time.

"It makes business sense to us to support the communities on which we depend, and we do depend on them. If there's no cocoa there's no chocolate.

"Specifically, Ghanaian cocoa is a critical ingredient to Cadbury, it has been here for more than 100 years and we have a social responsibly to try to make a difference to these communities and their livelihoods. It is important to us that there is a thriving cocoa industry in Ghana."

Yet despite investment in the country, there is a problem. The average age of Ghana's cocoa farmers is above 50, with young people from villages increasingly moving to the city. So Mr Bunker has hired a clutch of bright local graduates to spread out across Ghana and communicate to those considering leaving their villages the importance of the cocoa

industry to the country's economy.

Mr Bunker sees addressing issues such as sustainability and looking after local communities as not simply business imperatives but of huge importance to consumers, too. "Ultimately whatever we do is determined by consumers and they want to know they are eating an ethically sourced product. It's true in chocolate, it's true in coffee and it's true in many other product categories."

Cadbury has sold 300 million bars of Dairy Milk since the brand started buying Fairtrade cocoa. In the past year Cadbury has paid out £2.3 million in Fairtrade premiums -as well as setting a minimum price the organisation adds on an extra premium to allow communities to fund improvementsto healthcare and education.

The difference between villages getting this extra payment and those less fortunate is clear to see. The dance that Mr Bunker and Harriet Lamb, who runs the Fairtrade Foundation in Britain, shared with the locals at their welcome party to a small Ghanaian village, was, you

suspect, well deserved.

BBC NEWS 28 July 2010 Last updated at 18:05 GMT

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Senior staff quit Cadbury after Kraft takeover

More than 100 senior staff from Cadbury have left since the firm was taken over by Kraft in February, it has emerged.

The US firm said 120 out of 165 senior staff from Cadbury, whose jobs were under consultation at Bournville and Uxbridge, have now left.

However, a spokesman said that amount of movement was not unusual and was commonly part of the integration process when two companies merged.

Kraft was criticised by MPs in April for the way it handled the takeover.

'History and tradition'

John Bradley, who used to run the Cadbury World tourist attraction, said managers were leaving in large numbers because Kraft do not value the brand's heritage.

Continue reading the main story

“Start Quote

They seem not to understand what they have bought”

John Bradley

Mr Bradley, who worked for Cadbury for 24 years before leaving the company in 2004, said: "Kraft seem not to care one iota about the history and tradition of Cadbury.

"They think they have just bought a series of brand names that they are going to integrate in their business just like they did Ritz Crackers and Toblerones and the other things that they bought.

"So, to my mind, they seem to not understand what they have bought."

Kraft said that its UK offices would be consolidated into existing offices at Bournville and Uxbridge.

It also said that former executives at Cadbury had taken one third of Kraft's top 50 positions across the company.

The remaining 45 employees, out of the 165 under consultation, had been given permanent roles in the organisation, the firm added.

"While this is a period of uncertainty for both Cadbury and Kraft Foods colleagues, we pride ourselves on being as sensitive and respectful as possible," a spokesman said.

Irene Rosenfeld, chief executive of Kraft, is planning her first visit to the Bournville plant, in Birmingham, later this year