Chocolate wars: the plight of Cadbury's
US food giant Kraft wants to buy Cadbury. So should we sell such a 'British' brand, or is it just another business?
When George Cadbury decided some 150 years ago to combine the business of making chocolate with his Quaker principles of quiet philanthropy, the result was the famous Bournville village which provided high-quality housing at a low-cost to his employees. As he put it: "No one should live where a rose cannot grow."
The British confectionery giant has proudly hung on to its benevolent image ever since. From George Cadbury's descendants to Lord Mandelson, its supporters have been quick to raise Cadbury's historical determination to build a society as well as its profits as a key reason to resist the £10.1bn takeover bid by American food giant, Kraft.
In a robust defence of the 185-year-old jewel in Britain's food manufacturing crown, Lord Mandelson last week wrapped himself in the flag of corporate patriotism by warning that any foreign buyer of Cadbury would have to "respect our company, respect our workforce and respect the legacy of our company".
All of which suggested that the company would yesterday make its proud heritage as a source of enlightenment in the rapacious world of modern business a key plank of its argument when it formally rejected the hostile bid from Kraft. Asked about the merits of the US conglomerate, Felicity Loudon, the great-granddaughter of Mr Cadbury and a remaining shareholder said: "I identify them with plastic cheese on hamburgers."
But far from underlining the cultural and historical differences between Kraft and Cadbury, the British firm laid out its defence in stark business terms that accused the Americans of trying to "steal" the confectioner with a "derisory offer". In a four-page document, the words "Quaker", "philanthropy", "British" and "ethical" were not mentioned once.
Roger Carr, the Cadbury chairman, told shareholders: "Cadbury is an exceptional business worth much more than the offer put forward by Kraft... Kraft is trying to buy Cadbury on the cheap to provide much needed growth to their unattractive low-growth conglomerate business model."
The message was clear: allow Cadbury to remain out of the clutches of this lumbering transatlantic behemoth not because it has a special place in British hearts – conjuring up images of Bournville workers sending out shiny purple bars of Dairy Milk to the four corners of the Empire – but because this nimble-footed competitor will simply return better profits and growth, particularly in emerging markets.
The stance was in strong contrast to the statements – and sentiments – which have underpinned the debate about the sale of Cadbury, the maker and owner of brands from Creme Eggs to the Curly Wurly, ever since Kraft, the world's second largest food producer and the maker of products from Oreo biscuits to Philadelphia cheese, announced its intentions in September.
In a burst of what free marketeers will doubtless consider navel-gazing corporate nationalism, the battle to reject the American bid has relied heavily on the idea that Cadbury is the last bastion of a peculiarly British brand of Victorian entrepreneurship, combining the earthly pleasures of the cocoa bean with a business model that improved the lot of the workforce with decent homes, gardens, schools and pay. Together with the Rowntree's and Frys of York, the Cadburys were at the heart of a Quaker triumvirate of teetotal confectioners that mixed the allure of chocolate as an alternative to alcohol with a social revolution.
Ms Loudon, who proudly extols the Quaker values of her Cadbury forebears and their enduring influence, said she feared acquisition by Kraft would expunge all vestiges of her family's philosophy. She said: "My fear is this will all become history and it will be too late. I think the predators are circling. It's desperately sad that yet another British icon could go abroad."
Such feelings have been loudly echoed by a coalition of MPs, unions and employees who are calling on Cadbury shareholders not to accept the Kraft bid. They point out that both Rowntree and Frys were acquired by foreign competitors who pledged autonomy for the British firms, only to eventually consign them to history. The Rowntree name was abolished last year and Fry's, owned by Kraft, closed its York factory in 2004.
In reality, Cadbury Plc is every bit as much of a modern, multi-national and unsentimental business as its suitor. It has more than proved itself capable of taking hard-nosed decisions that some suggest sit uncomfortably with its undertaking to invest 1.5 per cent of all pre-tax profits for community investment.
The company, which generated global revenue of £5.3bn last year, announced the closure of its factory at Keynsham, Somerset, with the loss of 500 to 700 jobs as part of a project to move production to Poland. At Bournville, which once employed 11,000 people, a proportion of the 2,500 staff are contract workers who are not accorded the same terms of employment as their permanent colleagues. Staff at the Cadbury World visitor attraction went on strike for higher pay in 2004.
With Cadbury increasingly looking towards a "white knight" deal with another American confectioner, Hershey, experts said that neither sentiment nor national strategy will ultimately play a role in whether or not the British company stays independent.
The Cadbury years
Bournville Village is handed over to an independent trust by the Cadbury company.
Cadbury merges with Schweppes, ending ownership by the Cadbury family.
Cadbury announces closure of its Somerset factory, transferring production to Poland with the loss of 500 jobs.
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