Kraft Vs Cadbury

As you guys might remember, Cadbury has rejected an offer of $16.7 billion worth of stocks and cash in the early September. On Monday, 9 November 2009, it has yet again rejected the renewed offer by Kraft, which is now worth slightly lesser at $16.3 billion worth of stocks and cash.


"Cadbury is an exceptional standalone business," said Roger Carr, chairman of Cadbury, in a statement. "Kraft's offer does not come remotely close to reflecting the true value of our company, and involves the unattractive prospect of the absorption of Cadbury into a low growth conglomerate business model."

A slight tautology above. Isn't the business model a true value of their company?

Aside from that, Cadbury has also criticised Kraft as having a weak, low growth conglomerate business model. Does this criticism stand? Not at all! I totally disagree on that because Kraft has always had a diverse and recognised business model.


Just look at the number of international brands under it and how well it has been managed. The sustainability of those international brands alone is already awe-inspiring. Look at OREO, Toblerone and Planters. All these brands have been standing strong along with 50 other brands it has under its umbrella. It is no easy feat to manage all these brands if you lack a strong business model. You have to cope with the various strategies needed to manage the different brands because different brands cater to different target market and they have different prices attached to them. Just these two factors alone already requires the close co-ordination between the product manager, price manager, retail manager, logistics manager and so many other people from the company. To say that it lacks a good business model is seriously an insult to Kraft's ability.

In an effort to acquire Cadbury, Kraft has also sliced off some of its million-dollar brands just to draw out some money to bid for Cadbury. Such a sacrifice to trim their budget and to get rid of some of its high earning brands is really not easy.

There has also been the debate about whether Kraft should have bid more, instead of lesser for Cadbury. Many believed that Kraft slackened off the bid because there are no competitors arising as a result of this fiasco and maybe this shows that Cadbury is really not that attractive after all.

But, the CEO of Kraft Irene Rosenfeld has never felt that way, she has always been really attached to Cadbury and is confident that by assimilating Cadbury into Kraft, it will further accentuates Kraft's global position as a market leader as well as a diverse player.

Then again, even if Kraft bid more, Cadbury might not even be interested since they are so staunch on their belief that they can standalone. Maybe they might want to turn the time machine all the way back to early September and start thinking how their stock prices climbed 26%. It was all because of the bid by Kraft. Because Kraft believed in Cadbury. Rather than appreciating it, Cadbury castigated Kraft for undermining them. Honestly speaking, Cadbury is really overly-complacent and they are really not aware of the competitors they are facing in this market.

All the best to Cadbury.

Credits -investmentnz, -livetradingnews