Business Relationships

Kraft's marriage with Cadbury

Kraft's marriage with Cadbury

Article http://www.businessweek.com/managing/content/feb2010/ca2010028_928488_page_2.htm         

Kraft’s acquisition of Cadbury has been part of every conversation in the agbusiness industry.  Both companies are prestigious brands with solid global markets, this merger of Kraft and Cadbury will control 15% of the world’s confectionary market making it the largest.  In respect to business relationships, this merger in terms of annual cost savings, is predicted to save Kraft about $625 million in procurement, marketing and R&D.  Kraft will take advantage of these cost reductions by using Cadbury to tap into the luxury segment of many emerging markets like India and Latin America.  So far this all sounds good for Kraft, but what benefits does Cadbury receive?  Cadbury benefits from Kraft’s huge amount of financial resources and assets to make products like Chocolate bunnies and Dentyne Ice at cheaper costs.  The merger in the long run is expected to increase sales 5% annually.  This relationship will work in the long-run.

 

 

Comments




  • It would seem that this marriage would do well in the future, however Kraft initially did not have enough money to purchase Cadbury. Cadbury, while maintaining a very high potential (carrying 15% of the market), will still have challenges to face. The effect of merging two companies of different backgrounds and such different positions could prove harmful. With Cadbury being such a well-established British group, even the public in the United Kingdom has had opposition to the idea of merging. When does pride meet compromise? Clearly the agricultural market has had an effect on the financial position of Kraft, and it will be interesting to see if Cadbury will be treated as a full partner. There has been much exchange over bidding wars over the amount of stock and amount of cash offered. Another thing to think about is how to implement both companies. With that being said there will be a cost in assuring the companies merge successfully, the question is can Kraft keep its financial position currently. If all goes smoothly, its win win. That being said, I have to say that i love confectionaries...and i think this marriage is a "match made in heaven."

    greenman, 2 years ago | Flag
  • it's very sad that companies are losing their original identity because of take overs. Legacy created with painstaking efforts can go into oblivion due to such take overs. Let's hope that the products under Cadbury's fold earlier continue to enjoy the same prominence as they did before and it does not wane out because of the take over. It is also sad to note that the the UK has been losing out on several such legacy brands.

    masochistemocrhistian, 2 years ago | Flag
  • While the relationship may work in the long run and the prospects are good, I think that both companies have a lot of hurdles to overcome before gains are realized.  Kraft didn't have the money to acquire Cadbury at first, so they're weak from a financial standpoint after this acquisition.  Furthermore, it's hard to call this a merger because Kraft is treating Cadbury as a subsidiary rather than a partner.  What remains to be seen is what Kraft will do with the Cadbury name, and how the British, proud as they are of the Cadbury brand, will react.

    jfreund, 2 years ago | Flag
  • In some industries a couple of companies have a vast portion of the market. For example, in the car industry in the US, three or four companies control well over 65% percent of the market. It is intereting then that in the food industry a 15% market share has such a huge impact, where as in other industries that would signal a declining company.  

    mohsin88, 2 years ago | Flag

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