Kraft Swallows Cadbury [Updated]

Kraft Buys Cadbury

Well, it is done, mostly. After opening its mouth a little wider than during its first attempt, Kraft is poised to swallow British chocolate maker Cadbury. Kraft had to increase its offer from 761p to 840p per share and add a 10p per share dividend. Last night, Cadbury’s chairman Roger Carr agreed to recommend to its shareholders to accept this offer.

Although it is still possible for Hershey to make a competing bid as was reported over the weekend, it is unlikely that it will match this offer which is right in line with what Cadbury shareholders expected. Besides, Kraft is about five times the size of Hershey.

It will take some time to assess the fallout of this takeover. Kraft has left a bad taste in British mouths. After its takeover of Terry’s, another British chocolate maker, Kraft closed its plant two years later. Cadbury unions have claimed that Kraft plans to lay off some 10,000 workers. Even Business Secretary Lord Mandelson chimed: “If you think that you can come here and make a fast buck you will find that you face huge opposition from the local population . . . and from the British Government.” And the Independent worries that Kraft will change the formula for Cadbury, reducing its cocoa content, etc.

All this talk about keeping British corporations British, is, of course, nonsense. British corporations would to the same to any other company of the target promised higher profits. That’s global capitalism. And Kraft is not going to change Cadbury’s formula. This is not some plot to impose the lousy American chocolate standards around the world. This is all about capturing Cadbury’s global reach, particularly in India where it dominates the chocolate market and where Kraft has no presence yet.

My biggest worry is about Cadbury’s recent commitment to fairtrade sourcing for this Dairy Milk bar. U.S. corporations have a lousy track record when it comes to fairtrade. And I would not be surprised if Kraft changed the Cadbury decision. Kraft itself has made tentative steps towards certification using the Rainforest Alliance, a certification that imposes virtually no constraints nor any fixed cost on Kraft. It’s sustainability on the cheap for Kraft and we may see more of that.

UPDATE, January 20. I’m obviously not the only one worried about the fairtrade agreement. Check this article in the Guardian.

UPDATE, January 22. Apparently Kraft will honor Cadbury’s commitment to source fairtrade cocoa for its Dairy Milk bar, at least according to an article in the Guardian.

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