Kraft split raises more doubts about value of Cadbury takeover

August 4, 2011

On hearing that Kraft intended to split it operation into two, the first image that came to my mind was that of the Grand Old Duke of York.

Hopefully (for the sake of shareholders if no one else) Kraft chief Irene Rosenfeld’s grasp of tactics is superior to that of the benighted generalissimo. But we cannot be sure at this stage and nor – judging by their confused reaction – are some of Kraft’s investors.

True, one of the most tiresome of these – corporate raider Nelson Peltz, who has been endlessly belabouring Rosenfeld for Kraft’s dead-in-the-water share price – thinks it’s a great idea to split the lumbering behemoth into a fast-track candy and snacks company centred on emerging markets (and by implication double digit growth) while leaving the dreary North American grocery business to slumber on as a “yield centre” with a no-hope share price.

According to his logic, Rosenfeld has been playing a long and crafty (sorry) strategic game, in which the $19bn Cadbury hostile takeover was only the first move. Rosenfeld needed Cadbury for its dominance in emerging markets, so she could reshape Kraft’s existing snack lines into a global growth business. Warren Buffett, another long-time Rosenfeld critic, seems to have adopted the same line, albeit in more muted language.

Having met Rosenfeld, I can attest that she indeed a very sharp cookie. But whether she has been that crafty I – and rather more importantly, many members of the investment community – have reason to question.

Undoubtedly she has been limbering up a dramatic piece of financial engineering for some time. But maybe that’s all it is: one last, opportunistic, throw of the corporate dice to get two of her most irksome and powerful critics off her back.

Here’s the flaw in the grand strategy theory. If Rosenfeld had the idea of capturing access to developing markets all along, how come she so successfully managed to jettison all the senior people who knew anything about exploiting them? I am of course talking about virtually the entire senior tier of Cadbury management, which formed a queue to the exit within months of the takeover in early 2010.

I am afraid Kraft lifer Tim Cofer – if that’s who ends up getting the top job at Kraft Snacks and Candy – simply won’t cut the mustard by comparison.

If Kraft, in buying Cadbury, was merely parlaying itself into the world’s emerging markets, it chose a peculiarly clumsy and perverse way to do it.


Rumbol and Sleight departures flag up threat to UK-centric marketers

April 28, 2010

Are the imminent departures of high-profile marketers Phil Rumbol and Cathryn Sleight, from Cadbury and Coca-Cola GB respectively, by any chance related? In one important respect they most certainly are: both are casualties of globalisation. The corporate circumstances may be different, but the underlying cause has been the same.

Cadbury had its destiny decided for it by the deus ex machina of corporate takeover. A successful global company with a premier-league set of brands and high-octane growth prospects in emerging markets, it nevertheless had significant vulnerabilities – particularly in Europe – which Kraft was able to exploit with the seductive promise of greater efficiencies and economies of scale should the two companies “merge”.

Coca-Cola has reacted to similar cost inefficiencies in its mature European operations by embarking on an internally generated “rationalisation” programme which will reduce its ten existing European business units to four. Coke is in no way a potential takeover target, but may well be reacting to investor pressure.

In the words of Dominique Reiniche, president of Coca-Cola Europe: “The changes we are making will simplify the way we operate in all areas of the business. This will drive efficiency by enabling us to be faster to market and to increase the scale of our activities across Europe.” He does not mention shareholders, but we can be pretty certain they will be gratified by the extra margins generated. Perhaps coincidentally (given his hostility to the Cadbury bid), Warren Buffett – near enough the world’s wealthiest man – is a significant investor in both Kraft and Coke.

One side-effect of both company restructures has been to subordinate national marketing units to a new pan-European marketing management team. As will be seen, that has implications for ambitious UK marketers – not all of them positive.

In the Kraft/Cadbury case, things could have turned out well for Rumbol had he chosen to toe the new corporate line. Far from being made redundant (unlike many senior colleagues), he was slated for promotion to a new pan-European marketing role. The only problem was (so we are told), Rumbol’s new job would be based in Zurich and he did not wish to relocate his family there. So, he hasn’t… What may also have troubled him was that the new role was in some ways more narrowly defined than his present one. Its remit was chocolate (now under the auspices of former Cadbury executive Tamara Minick-Scokalo), to the exclusion of the gum and boiled sweets sectors.

As for the role of Coca-Cola GB marketing director – Sleight’s fiefdom since 2006 – it has been axed. The function will now be folded into a broader role operating out of NWEN, the new pan-European unit consisting of Iberia, Germany, North West Europe and “Nordics” headed by Sanjay Guha. Guha will assume the title marketing and Olympics director, NWEN; currently he is Coca-Cola GB president. Sleight is expected to leave the company.

As it happens, I don’t think either casualty will have much difficulty finding another job. Sleight has been credited with the UK launch of Coke Zero, the company’s most successful piece of carbonates new product development in over two decades; and has also superintended the fortunes of Glaceau Vitamin Water (which, for all my reservations about its positioning, has done quite nicely thank you).

As for Rumbol, he had already made a name for himself as the Stella client, at a time when that brand still produced great advertising. What he has since done at Cadbury will, however, have immeasurably increased his credit. He helped to launch the confectionery giant’s first foray into chewing gum (ironically, one of the reasons that margin-hungry Kraft began showing an interest). And he has been the impresario behind some of the most noted advertising in recent times, to wit Fallon’s “Gorilla” and “Eyebrows”. Move over Simon Thompson (who presided over a run of great advertising at Honda, a few years ago).

I’m less sanguine about the prospects of home-loving UK marketers in general, though – especially if working in large corporations. The tide is against you, unless you’re prepared to wield your passport more freely.

PS. Rumbol may have opted out of a new life at Kraft Cadbuy, but Ignasi Ricou, president of Cadbury Europe, is to stay on. He will be president of sales, Kraft Europe, with special responsibility for gum and candy.

Tamara Minick-Scokalo resurfaces as Kraft’s European confectionery chief

February 4, 2010

I’m reliably informed that the “senior role” at Kraft being taken up by former Cadbury European chief  Tamara Minick-Scokalo is head of European confectionery.

She will therefore be the pivotal figure in integrating Kraft’s existing product range – principally Toblerone and Milka – with the newly acquired brands at Cadbury.

Readers of this blog may recall that she left Cadbury in slightly mysterious circumstances at the beginning of last July. An American with 20 years experience in Procter marketing, Minick-Scokalo moved to Europe a few years back (she is based in Geneva) and took on the top marketing/general management roles at US wine maker E&J Gallo, then Elizabeth Arden. Two years as head of global commerce at Cadbury Schweppes followed. She afterwards became European president of the demerged Cadbury confectionery operation, in January 2009. As such, Minick-Scokalo sat on the Cadbury executive board, reported directly to chief executive Todd Stitzer, and had control over Cadbury’s confectionery operations in both East and West Europe: that is, over 10,000 employees, €1bn annual sales and numerous factories.

But Stitzer, up to this point her champion, let her go after only six months in what appears to have been a selective senior management cull designed to cut costs.

How fortuitous then, that Kraft should launch a takeover bid for Cadbury in September and, having sown up the deal a few days ago, hire Minick-Scokalo to mastermind the brands’ integration from March 1. Whatever else may be wrong with the corporate “merger” (Warren Buffett is the expert on that matter, not me) integration of the two confectionery operations in Europe looks like an obvious fit. Cadbury, outside the chocolate-gobbling UK, is a patchwork quilt in need of further rationalisation; Kraft, on the other hand, already has strong Euro brands in Milka, Toblerone and Terry’s.

I do hope the senior managers who stay on at Cadbury (the top three having already quit) were nice to Minick-Scokalo before she left. Ignasi Ricou, who succeeded Minick-Scokalo as Cadbury president of Europe, and Phil Rumbol, UK marketing director, will no doubt be polishing their CVs just in case.

I imagine she will also have a hugely enhanced fan club in the marketing services world. Ogilvy, for example, handles the Toblerone brand and JWT does Kraft corporate advertising. Fallon need not lose all hope, however. Minick-Scokalo championed the ‘Gorilla’ advertising campaign.

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