Cadbury fights for its life

September 7, 2009

CadburyOne of our national treasures looks set to disappear. No, no,no. I am not talking about Sir Tel being replaced at Radio 2 by Chris Evans, but of Cadbury, which faces a £10.2bn hostile bid from Kraft Foods.

The chances of Cadbury retaining its independence after this unwanted intervention do not look good. Of course, it may not be Kraft that emerges the eventual winner. According to City analysts, the Kraft bid – though superficially attractive at a 31% premium to the pre-bid share price – is pitched far too low. What they have in mind is the same multiple that Mars paid for Wrigley last year, which would mean about £10 a share – a long way up from the 745p on the table. Also, only £4.1bn is in cash, so the bid is far from knock-out.

But maybe we’re getting too technical here. Cadbury is definitely in play and Kraft is, at first sight, better positioned to haul the booty away than Nestlé or Hershey. In fact, it cannot afford not to win; neither can its competitors stand idly by and let it. Here is a landscape-changing deal in the offing, which would propel Kraft to the world’s largest confectionery company in an industry where scale is increasingly important (as the Mars deal showed).

Nestlé and Hershey would have considerable problems with the competition authorities (even if they divided the spoils between them), but there are few apparent conflicts of interest affecting a Kraft/Cadbury combo. Kraft, which owns Milka, Terry’s and Toblerone, is strong in confectionery in Europe and Latin America, where Cadbury is weak. Cadbury, on the other hand, offers Kraft a high-growth gum business and exposure in a number of invaluable emerging markets.

Kraft has suggested it will keep the Somerdale factory going, which Cadbury itself is threatening to close. That’s politically astute, but it won’t alter the fact that any alternative Cadbury owner will have to make some medium-term decisions likely to squeeze the culture out of the acquired company. Nestlé did no less when it acquired Rowntree, another Quaker company, over 20 years ago. There will be too many cost synergies involved, debts to be paid off and shareholders appeased, post-deal, for Cadbury culture to be maintained in aspic.

What of the brands? The Cadbury Dairy Milk kids may well twitch their last in one big wide-eyed rictus, which would be a great pity. But, if the Kraft deal does come off, I know someone likely to come out smiling. Kraft places a fair bit of its promotional spend with JWT, which also has a toe-hold in the Cadbury gum business.

And lastly, what of Nestlé? If Kraft triumphs in the takeover battle, that will leave Nestlé’s carefully laid plans for becoming the dominant global confectionery player in tatters. There’s more on this in my column this week.


RB restores lustre to dulled FMCG careers

July 14, 2009

RBReckitt Benckiser is demonstrating its customary approach to risk and innovation with an ambitious corporate marketing communications campaign.

RB has long outperformed its rivals in what to the uninitiated is the dull household sector. With the aid of a clutch of power brands such as Vanish, Cillit Bang, Finish, Nurofen and Clearasil, it regularly bests them on organic growth and profit margins, facts not unnoticed in the City. Not only that, it is virtually the only packaged goods company which continues to beat supermarket own-labels at their own game, proving the consumer will pay a premium for branded goods as long as they are a) better and b) better marketed.

While the RB success story is well rehearsed in the marketing and investment communities it is, I would guess, almost unknown to consumers, who buy solely on the strength of individually marketed products. In this, RB has been missing a trick. And the surprise is, missing it for a long time, considering the trail blazed by the likes of Cadbury or Unilever.

AndraeaThe new global campaign, which is being masterminded by corporate affairs director Andraea Dawson-Shepherd (herself a recruit from Cadbury), sets out to remedy this deficiency in the wake of RB’s corporate rebrand last spring. Handled by Euro RSCG, it is weighted towards building awareness among 22-32 year olds, via social media. But it aims to do a lot more besides.

“Our power brands are already well known,” says Dawson-Shepherd. “We need to make ourselves better known among the next generation of people considering a career in consumer goods and let them know what the company has to offer.” Noting that financial services isn’t the magnet it used to be for ambitious marketers, she hopes to restore the dulled colours of a career in FMCG.

Lateral thinking in the middle of a recession. Size of communications budget almost no object. Now there’s a thing.


Diverted Boulton makes safe landing at Nationwide

July 9, 2009

James BoultonJames Boulton, the ex-HSBC marketing director and brother of Sky TV presenter, Adam, has finally landed at Nationwide after a bizarre mini-Odyssey involving British Airways.

In circumstances still not entirely clear, Boulton seems to have quit HSBC at the beginning of the year in the belief that he had a job in the bag – a good one too – at BA as global marketing director, following in the footsteps of Tiffany Hall.

Only to discover that he did not. Having led him up the garden path, BA either withdrew the offer or halted the process. Boulton had been applying for a job that would no longer exist, due to a management “rationalisation”…

It’s another example of just how ruthless companies have become in slashing key personnel once they are deemed too expensive. Equally unsettling was Cadbury’s recent decision to get rid of its European president, Tamara Minick-Scokalo, only six months after elevating her from group commercial director.

Boulton may not have got the CMO role he was evidently looking for after HSBC declined to expand his duties (I note his successor, Brendan Cook, has been given additional responsibilities – product development and research). But he could have done a lot worse than end up at Nationwide.

In effect, he takes over the high-profile position occupied for many years by Peter Gandolfi, although the title, like much else, is different. Plenty has changed at Nationwide under the leadership of Graham Beale, including most of the key personnel. That’s only to be expected. The sleepy mega-mutual is well positioned (unlike almost any other financial services organisation) to benefit from the Credit Crunch. Big mutuals – friendly, conservative and, above all, reliable (it says in the script) – are back in fashion. And since Nationwide is by far and away the best branded and biggest – at over half the sector’s capitalisation –  it should be able to exploit this new mood much better than anyone else.

Beale has, perhaps justifiably, been whingeing about the ridiculous capital ratios (money kept back as security) being imposed on his organisation (given it is not particularly reliant on the wholesale money market, exposure to which has been a major cause of vulnerability). I notice this has not prevented Nationwide from launching an eye-catching 125% mortgage aimed at attracting people in negative equity who want to move.

Boulton, with his packaged goods skills acquired at Unilever and PepsiCo, has a promising canvas to work on.


Why is the head of Cadbury Europe quitting?

June 30, 2009

Tamara Minick-ScokaloTamara Minick-Scokalo, head of Cadbury Europe, is leaving the company at the end of July. That much we know for a fact. The more interesting question is why.

According to Cadbury ceo Todd Stitzer, the departure is no more than a delayering exercise aimed at surmounting the “cost challenge” belabouring us all in these straitened times. Ignasi Ricou, currently head of Cadbury commercial operations Europe, looks like being the gainer. He will become president while retaining his commercial functions.

But wait a minute, wasn’t Minick-Scokalo Todd’s blue-eyed girl? That’s certainly what the P&G-bred marketing executive was billed as. She joined only two and a half years ago, from Elizabeth Arden, as global commercial chief and was catapulted to president of Europe last January.

It’s strange, even careless, to let your head of Europe go after six months in the post. Perhaps there were personal reasons? Perhaps she wanted to move on? Maybe. In which case it’s a curious coincidence that her departure has been wrapped up in a management reshuffle that also involves the legal department.

At any event, Fallon London (of ‘Gorilla’ and twitching eyebrows fame) should watch its back. She was the agency’s biggest champion.


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