Is Kraft working for Cadbury? - Business, Innovation and Skills Committee Contents


Kraft's acquisition of Cadbury some 14 months ago prompted an inquiry by our predecessor committee during which Kraft gave a number of important undertakings in relation to preserving Cadbury brands, manufacturing, jobs and other matters. Most notably, Kraft undertook that there would be no further compulsory redundancies among manufacturing employees and no additional manufacturing facilities closures, in each case for at least two years. The particular circumstances of the acquisition—notably the reversal of position on whether Kraft could keep open Cadbury's Somerdale factory—ultimately gave rise to a review of the Takeover Code and a statement of public criticism of Kraft by the Takeover Panel in relation to Kraft's intentions for Somerdale.

At the mid-term of Kraft's two-year commitments on jobs and manufacturing, which apply until March 2012, we invited Kraft to give evidence on its compliance with those and the other undertakings. In advance of that session, Kraft provided a progress report. While encouraging in many aspects, Kraft's progress report steered somewhat away from certain sensitive issues such as headquarters relocations and pay and conditions.

In a repeat of our predecessors' experience, Irene Rosenfeld, the Chief Executive Officer and Chairman of Kraft, refused to give evidence despite repeated requests from us that she should appear. Neither that refusal to attend, nor the manner of it, reflected well on Kraft, nor did Kraft's persistence in failing to acknowledge the seriousness of the Takeover Panel criticism—criticism which by its gravity would alone have merited Ms Rosenfeld's appearance before us, as a committee of public scrutiny. That sorry episode overshadowed what could have been a positive discussion on the future of Cadbury under Kraft's ownership. In its correspondence with the Committee Kraft in our view steered close to a contempt of the House. We trust that that will not be repeated.

More positively, it would appear from the evidence given to us that Kraft is currently honouring the undertakings given to our predecessor committee and is committed to investment in Cadbury. We were especially encouraged by continued investment in Bournville and recruitment into research. Given the particular responsibility Kraft has to Cadbury employees following the Somerdale episode, we trust that this approach to investment will continue. It would also assist considerably in rehabilitating Kraft's reputation if the savings planned from integration synergies were used to support further investment for growth and accommodate the results of that growth in terms of recruitment needs.

We remain concerned on two issues. First, while Kraft's commitment to manage the Cadbury brands for the UK may have been observed insofar as the UK retains a significant marketing function, it would seem that the strategic decisions on brands are being made in Kraft's European headquarters in Zurich. We hope Kraft will refrain from further transfer of marketing responsibility to Zurich given its oft-stated public commitment to Cadbury's brand heritage.

Our other concern covers the programme of harmonisation of pay and conditions which Kraft chose to announce to us in oral evidence, apparently in advance of any union involvement. We trust that Kraft will fully engage with the union, and that the harmonisation programme will fully respect Kraft's non-time limited undertaking to respect Cadbury's existing employee terms and conditions.

A positive outcome of Kraft's takeover of Cadbury was that it instigated a review of the Takeover Code by the Takeover Panel and our predecessor Committee's Report played a significant role in highlighting the need for such a review. The Government is also conducting a review of takeovers and corporate responsibility. We trust that it will use this Report and our predecessor Committee's Report as a valuable case study when it comes to formulating policy in this area.

previous page contents next page

© Parliamentary copyright 2011
Prepared 23 May 2011