Kraft gets its cup of Cadbury

Workers at Cadbury's chocolate factory in Dunedin are nervous about their futures after confirmation of a multibillion-dollar takeover of the company by United States food giant Kraft.

The British chocolate manufacturer has fallen to an GBP11.7 billion (NZ$26b) takeover by Kraft. The deal brings to a conclusion one of the most fiercely contested takeover battles London's financial centre has seen in recent years.

In New Zealand, Services and Food Workers Union national secretary John Ryall said Kraft was owned by a private equity company, "which means they are leveraged up to the eyeballs as far as their borrowings for the takeover of Cadbury's".

Kraft would be looking to quickly reduce some of that debt which could have some impact on the Dunedin plant. The factory employs about 400 permanent staff and 100 seasonal workers. It laid off about 150 staff last year. A $51 million investment in the Dunedin factory, announced by Cadbury in 2008, secured the future of the plant under its present owners.

Mr Ryall said Cadbury had indicated that the staff cuts in the last year meant staffing levels were at optimal levels. But a different company direction and ownership structure could impact on the previous commitments.

The British trade union Unite has warned that Kraft plans at least 10,000 job cuts worldwide to slash costs and repay the cash it will need to borrow for the deal. Cadbury employs 45,000 people worldwide, including more than 9000 in Britain.

In New Zealand, Cadbury's brands include Minties, Pineapple Lumps, Moro bars and Dairy Milk. Cadbury New Zealand had revenues of $283.4m and made a profit of $17.7m in 2008, the latest figures available, down from $27.2m the previous year.

Kraft's brands include Vegemite and Toblerone chocolate, but its sales are relatively small here at $21m. Cadbury's roots in Dunedin date back to the 1880s and it is one of the two dominant chocolate and sweet companies in New Zealand, with annual sales of $283m. The other player is Mars/Masterfoods.

The takeover bid prompted an outpouring of resentment against foreign takeovers of British companies. In the past four years, more than 292b has been spent by foreign companies buying British rivals. Kraft bought Terry's, another chocolate company, in 1993 and closed its York factory two years later.

Kraft suffers from a poor reputation among many in the food industry because it makes most of its money from processed cheese and meat.

Chocolate Box: Cadbury was founded in 1824 when John Cadbury, a Quaker, opened a shop in Birmingham selling tea, coffee, hops, mustard and a new sideline – cocoa and drinking chocolate – designed as an alternative to alcohol.
John and Benjamin Cadbury refined their cocoa process in 1866 to produce a more palatable drink. The cocoa butter created as a by-product was turned into eating chocolate.
In 1897 the company created its first milk chocolate. It introduced Dairy Milk eight years later. Dairy Milk became their bestselling product in 1913, and remains so.
Cadbury is the world's second-largest confectioner after Mars-Wrigley.
It operates in more than 60 countries and employs more than 46,000 people. The company made profits of 638 million in 2008.
Source: Cadbury, Reuters, BBC

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Sarah   #24   01:08 pm Feb 16 2010

Rant and rave all you want but what you going do when your kid wants a chocolate Easter egg? Cave.....

Chris C   #23   11:49 am Jan 20 2010

It's the other way around with regard to private equity: hedge funds have about a quarter stake in Cadbury.

Craig   #22   11:35 am Jan 20 2010

And ditto to Andys comment. Kraft is not owned by private equity. Buffett, the legend owns 9.4% of the public company. Which used to be owned by another public company called Philip Morris. And if it was still owned by Philip Morris, they would own ciggies and chocolate.....very addictive stuff.....

Andy   #21   11:17 am Jan 20 2010

Kraft is not owned by Private Equity. It is listed in the NYSE and is a DJIA component. So while they will be looking to reduce debt, (their will be an equity component to the deal) they are not leveraged to te eyeballs as Services and Food Workers Union national secretary John Ryall states. Stop stirring the pot John.

Ted Lowe   #20   11:06 am Jan 20 2010

Cadbury's famous Dairy Milk block is now made in their operations in Tasmania I believe, not in Dunedin. Probably using a glass and a half of Australian milk. Dunedin is facing a big problem: a continuing decline in economic output, loss of skilled private sector jobs, and increasing reliance on tax and rates money (via the Uni, DHB and DCC) to fund the local economy. It is not being helped by local authorities insisting on spending tens (hundreds) of millions of dollars that they do not have on Think-Big projects which will not help create new high income sustainable industries in this city and which in fact has greatly limited all future City Councils in their options to help this city out of its economic malaise. Great people and good jobs are gradually trickling out of Dunedin and not being replaced at the same rate. A bad trend.

Ivan   #19   10:19 am Jan 20 2010

Come on NZ! Cadbury or Kraft... Who cares. Both these companies can burn down in my opinion. Why don't we start supporting New Zealand OWNED and made products? Or better yet, anyone thought of starting up their own chocolate factory???

Mark   #18   09:39 am Jan 20 2010

Chocolate is chocolate; it satisfies a desire.

Cadbury will just become another brand on the shelf with some fond (or perhaps, not so fond) memories.

Drac   #17   09:36 am Jan 20 2010

All I can say is Whittakers must be loving this news, on a side note after they messed with the recipes myself and a few friends stopped buying Cadbury’s and haven’t bothered to go back.

Shay   #16   09:35 am Jan 20 2010

Cadbury can take a flying leap as far as I'm concerned. Even though they were British owned their Roses chocolates were a _Kiwi_ icon. I saw a box this year and they had dropped a toffee and included the Australian infested sore on the bum of the confectionary world, the cherry ripe.

HH   #15   09:21 am Jan 20 2010

Heike:

And that is why NZ stays the way it does, because it's taking one step forward and two steps back. It's sad. I've been here for 12 years now and I still get annoyed when I see the lack of interest in some things here, some things are not taken very seriously here. I just wish it was more modern and the houses were built a lot better.

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