Kraft criticised over 2010 Cadbury takeover

Posted on 23 May 2011 by The Manufacturer

Howard Wheeldon of BCG Partners comments on the way in which Kraft dealt with an unpopular takeover of a British food manufacturer.

MPs are right to criticise the behaviour of Kraft Food management refusing to appear before the Business, Innovation and Skills Committee of the House of Commons. Published today, the report from the Committee looked at the subsequent effects of the £11.5bn takeover by Kraft of chocolate and confectionery maker Cadbury in February 2010. By refusing to give evidence to the Committee, Kraft management generated contempt in the House of Commons.

At the heart of the issue are strong indications provided by Kraft management during the original takeover process that there weren’t intentions to close plants. Nevertheless, months later as workers at the Cadbury factory in Somerdale found that their new owner wasted no time in making moves to ensure the plant wouldn’t reopen after it was acquired by Kraft.

True, we may never know whether the seeds of this closure idea may have been embedded within the outgoing Cadbury management itself. Had the takeover by Kraft not occurred, Cadbury could well have been planning to close the plant anyway. This is a quite possible scenario, although it hardly relates to the real point – how Kraft management has behaved.

While the House of Commons Committee appears to have agreed that Kraft had not extended any actual promise over the future of jobs during the takeover process, the general perception was that no jobs were immediately at stake.

If there is any good news in this report for those employed at the UK plants of Cadbury, it is only that the Committee is apparently satisfied that Kraft ostensibly intends to continue investing in the UK. But judging the past performance of Kraft management, all I can say is that no-one at the Bourneville home of Cadbury in Birmingham should feel completely secure in their job.

By refusing to appear before the Committee, Kraft may have done damage to its UK operations. It is not the issue of whether promises were broken; it’s simply that in this day and age failing to account for your actions to a wider audience shows contempt for corporate transparency.

The Committee process in the House of Commons and House of Lords is hugely important within the democratic system of UK government and it is something that we should all welcome as being both important and necessary. Only last week I appeared before the Commons Public Accounts Committee to provide views related to defence matters, and had no hesitation in so doing. We should be welcoming Kraft to the UK in its purchase of Cadbury. It means that in a free and open market, we should all welcome the takeover of one of our best known brands as a positive rather than a negative event.

By repeatedly turning down requests to appear before the Committee even via a video link to the UK; Kraft has missed a tremendous opportunity to put the record straight and to be seen as open and honest.

Howard Wheeldon is a senior strategist at BGC Partners

Edited by George Archer