Cadbury Kraft takeover: More than meets the eye

January 20, 2010

Global Issue analysed by Susan Moger and Tudor Rickards

Updated: The integration of Cadbury into the Kraft Empire continues. Vince Cable, the highly respected financial figure imported from the Liberal Democrats, had made this one of his first interventions since the election to the Coalition Government, calling for a review of takeover practices.

Irene Rosenfeld made her first visit to her newly-acquired asset in October 2010.

The visit of Kraft CEO to Cadbury’s main Bournville cite in Birmingham, England continued the integration of Cadbury into the Kraft empire. The chief executive of Kraft Foods has not ruled out further Cadbury plant closures beyond the two years the firm is already committed to. Irene Rosenfeld said she was unable to offer further commitments after a visit to Birmingham’s Bournville factory. But she said it would remain “the heart and soul” of its chocolate business. Ms Rosenfeld had recently come second in Forbes magazine’s annual rankings of the world’s most powerful women, beaten only by US first lady Michelle Obama.

Asked what she was expecting with the merging of the companies, a net loss or gain in jobs, Ms Rosenfeld said: “I think it’s hard to say. It will vary area to area… We certainly understand that Bournville will remain at the heart and soul of our chocolate business and we are delighted about that. I think the key for us, though, this is a global business. We need to ensure that we are competitive on a global basis. As we bring together the combined company and we can share best practices we have the opportunity then to take the business to a new place.”

When it was suggested she was not able to make more of a commitment than at least two years, she said: “That’s correct.”

According to the Telegraph at the time of the takeover ,

The issues the review will look at include the “50pc plus one” minimum voting requirement for takeovers to go ahead; whether voting rights should be withheld from shares bought during an offer period; whether the 1pc disclosure threshold for dealings and positions in target companies should be reduced; and whether inducement fees and other deal protection arrangements should be restricted.

The review was launched by Business Secretary Vince Cable who said: “We welcome foreign investors but we want all shareholders to be empowered.” Last week [May 2010] the Panel took the rare step of publicly criticising Kraft over its acquisition of Cadbury. Its objections focused on assurances from Kraft that it would reverse Cadbury’s planned closure of its Somerdale factory. A week after winning the battle to buy Cadbury, Kraft reversed its position on Somerdale. The Takeover Panel concluded the US company should never have made its assurances on the Somerdale plant. It also criticised Lazard, Kraft’s adviser on the deal, saying the investment bank had “failed to discharge fully its responsibilities”. The Takeover Panel said it would take comments on the review of the code up to July 27.

An ealier post noted:

So the mighty Kraft finally hunted down its prey and swallowed up poor little Cadburys. Howls of protest from the UK. Nostalgia and affection for the taste of Diary Milk swept the land. One caller to a (BBC Five Live) phone-in said Cadburys was her favourite chocolate but that she would never buy any again.

In the wake of the takeover, LWD sought out an expert on Corporate Reputation for his views. Professor Gary Davies of Manchester Business School came up with several points that had been overlooked by other commentators in assessing the likely winners and losers of the takeover. He also added a more surprising comment based on his research into Corporate Reputation …

Students of Leadership

There are lessons to be learned from the Cadburys Kraft story from several perspectives. With the benefits of hindsight we might wish to consider what might have been done differently by the main parties involved. For the politically-minded, what ideas might be worth submitting to the Takeover Panel? How well do you think Irene and Vince Cable are operating?


Party Conference Time and Some Leadership Theorizing

September 23, 2009

Vince Cable

The Party Conference season in the UK is a rich source of insights into political leadership influence processes. Leaders we deserve examines similarities to processes of communication required in Business School projects

The similarities occurred to me as the project season [September 2009] followed closely after a period in which less-publicised presentations were taking place on Perspectives of Leadership, by MBA students at Manchester Business School.

One feature in common is the technical challenge of gaining acceptance of key ideas through a formal presentation.

Influencing: the immediate and distal audiences

In the Business School presentations, and in the party political speeches, speakers had to deal with more than one audience. In the political conferences, the audiences may be divided into those in the conference hall, and those for whom the conference was being transmitted immediately, and subsequently through news bulletins and various other channels.

For the MBA students, the audiences could still be divided into immediate and distal ones, but the more important challenge was dealing with the different audiences within the immediate presentation room.

The boundary management challenge

In technical terms the need to deal with two audiences requires management of ambiguities in boundary management. This is a technical term which boils down to a project leader having to be aware of several different but inter-related interests to whom communication is addressed.

The communication challenge is to deal with multiple audiences. This is another commonality between the student projects and the political speeches.

In the MBA projects, the student groups present to an audience including a business client who has provided a brief to the project, and a faculty member who has the responsibility of evaluating the project for its technical merits and assigning a grade which goes towards the MBA marks for each team member. The presentation has to satisfy those two different systems: the world of the business organisation and the world of University degrees.

Note that this is a bit more complicated than a consultancy project, although there are similarities. One trick of management consultants is to ‘borrow the client’s watch to tell him the time’. While this may still work to some extent for the client who wants reassurance rather than enlightenment, it is not going to impress the Business School Professors critiquing the presentation.

Why not rely on the opinion of the client for allocating marks to the student groups? Because of a phenomenon which goes under various names boiling down to in-group solidarity. The client often acts in concert with the group as if they were put on trial by those outside and hostile critics from the Business faculty. I am tempted to suggest there are aspects in the group dynamics of the famous Stockholm syndrome which explains how hostage-takers and hostages come together against a perceived common enemy.

Meanwhile, in the Conference Hall …

Political speeches in the Conference Hall also require rather subtle crafting if they are to be received outside as well as inside the party.

The complexities of this proces have added to the influence of communication advisors who also travel under the more opprobrious label of spin doctors.

The communication process has been codified into marketing elements or sound bites. As the public becomes more aware of what’s going on, sound bites alone are not enough for the message to be accepted.

On the first days of the Liberal Democrat conference, [September 22nd 2009] the tensions were evident. The party has had the freedom to fight in the relative obscurity of conference, without being too concerned at damaging electoral prospects. Now however, with the possibility of exerting influence in the next parliament within less than a year, the game has changed.

Party leaders can not be seen to be openly disagreeing on issues. Party activists can not speak out against ideas they believe to be smuggled in with inadequate debate. Even the near-saint like figure of Vince Cable was criticised for indicating a softening of policy away from a commitment to immediate abolition of Student top-up fees.

Watch out for…

As the Conference season progresses, watch and learn. Understand the planning that goes before a good presentation. See the way in which remarks on stage are subsequently worked over in news interviews. Ask yourself how you might have done better. You may be the less inclined to see political leaders as blundering foolishly and more as mere morals struggling to manage demanding and different audiences.

Which makes their challenges more difficult than those facing their celebrity interviewers.