4 Kraft's undertakings on Cadbury
manufacturing, R&D and brands
Introduction
42. In 2010, Kraft gave a number of undertakings
to our predecessor Committee. In this section we consider the
undertakings made in relation to manufacturing, R&D and brands,
and the progress Kraft has made in its merging of the two companies.
43. Kraft undertook:
- To preserve the identity of the
Cadbury brand and the company,[44]
and to manage the brands, the assets and the people out of the
UK;[45]
- To continue to base Cadbury marketing and sales
in the UK;[46]
- To continue to produce, in the UK, Cadbury's
Dairy Milk[47]
and Cadbury's other products in UK production at takeover;[48]
- That R&D facilities would be maintained.[49]
Current status
44. Kraft is now half way through its two-year
commitment in relation to manufacturing and jobs in the UK. In
the meantime, several major developments have been announced in
relation to HQ functions and R&D.
45. In March 2010, Kraft said that it would make
up to 150 workers redundant in the Cadbury finance, legal and
communications departments, mostly at the headquarters in Uxbridge
near London and also at the Bournville site in the Midlands. In
May 2010, Kraft announced that it would close its own Cheltenham
HQ, which employed 450 people, but would transfer the HQ functions
to Bournville and Uxbridge.[50]
Finally, in December 2010, the company announced that it would
move a number of key management roles to Zurich.[51]
46. Unfortunately, Kraft's Progress Report to
us avoided reference to most of these announcements. However,
it confirmed that Kraft had created 50 new expert positions at
Bournville.[52]
In addition, it said:
Last May we announced that Bournville, following
a $216 million (£135m) investment programme over the last
five years, will be Kraft Foods' global centre of excellence for
chocolate research and development. The centre of excellence will
drive new product development, new technologies and best practices
for such beloved chocolate brands as Cadbury Dairy Milk, Milka,
Toblerone, Côte d'Or, Terry's, Flake, Creme Egg, Green &
Black's, Suchard, Freia, Marabou and Lacta. Bournville will drive
innovation for the Kraft Foods chocolate business all over the
world.
We have met and exceeded our specific commitment
to maintain Cadbury's R&D sites in the UK. Cadbury's existing
science centre in Reading will become a global science and technology
centre serving Kraft Foods worldwide. Both the global centres
in Bournville and Reading are in addition to Kraft Foods' existing
global centre of excellence for coffee, which has been in Banbury
for more than forty years.[53]
47. Mr Bunker told us that Bournville is currently
recruiting to fill 50 R&D vacancies,[54]
that 50 sales roles are also being advertised,[55]
and that recruitment is happening in Reading.[56]
That is all good news indeed. Mr Bond also told us that some 40
of the Uxbridge workers had found alternative employment within
Kraft.[57].
48. In the evidence session Kraft was, however,
unable to extend its undertakings in relation to manufacturing
and jobs, or to share the results of its manufacturing review.[58]
Trevor Bond told us:
We are bringing jobs into the broader network. But
we live and work in very uncertain times. I am passionate about
Bournville, as you can tell, but I am also passionate about productivity.
We have to drive productivity as well as investment. That means
that we will not extend our guarantee after next year. What I
can guarantee is a strong business, such as we have had over the
past many years, is the best chance of long term success.[59]That
said, Trevor Bond confirmed that Dairy Milk would continue to
be produced in the UK for the foreseeable future.[60]
He also told us that growth in the sales of Cadbury's Dairy Milk
was strong and that Kraft had brought Cadbury hot chocolate production
and a certain amount of chocolate egg production back to the Bournville
site.[61]
49. Speaking about investment in Cadbury, Trevor
Bond said:
In Sheffield we have our largest sugar manufacturing
facility in Europe. In Bournville, we have over £150m worth
of assets. We are businessmen. We make what is right for our consumers
and customers, because that is what drives our businesses into
the future. We have fantastic assets—brands, people and
physical assets. Our responsibility to our shareholders and to
the broader community is to continue to invest, innovate and grow
them.[62]
In addition, Mr Firestone was able to confirm that
the major Cadbury intellectual property would remain in the UK,
to the extent that royalties are received on it by Cadbury UK
from the Swiss entity.[63]
This provided some reassurance both on Kraft's compliance with
the previously given undertaking on brand management and on its
payment of UK tax, albeit we heard that the senior marketing manager
is now based in Zurich[64]
and that strategic marketing decisions originate there.[65]
50. We welcome the increased
investment in Bournville. We also welcome Kraft's commitment to
expanding the research role carried out at Bournville alongside
the confirmation that the R&D facilities at Reading will continue.
51. Given Kraft's undertaking
to manage the Cadbury brands out of the UK, we trust that all
marketing posts other than that of the senior marketing manager
will remain UK-based. We trust furthermore that marketing decisions
made by Kraft at the European level will remain consistent with
strong growth objectives for Cadbury products in the UK and across
the region.
44 16 March 2010, qq 174 and 176 Back
45
Q 175, ibid. Back
46
Q 215, ibid. Back
47
Qq 177 and 179, bid. Back
48
Q 182, ibid. However, this was qualified by the proviso
that there were no plans to move production as of March 2010 Back
49
Q 298, ibid. This applied to Reading, and was qualified
by a proviso that the commitment was not in perpetuity. There
was a statement of intention to invest in Bournville at Q 193. Back
50
Financial Times, 11 May 2010, 'Cadbury bases to become
Kraft UK HQ' Back
51
BBC News, 4 December 2010, 'Kraft to switch Cadbury jobs to Zurich' Back
52
Paragraph 7 Back
53
Paragraphs 20-21 Back
54
Q 71 and Q 92 Back
55
Q 111 Back
56
Q 163 Back
57
See Q 76 Back
58
Q 74 Back
59
Q 83 Back
60
Q 79 Back
61
Q 81 Back
62
Q 133 Back
63
Qq 116 and 117 Back
64
Q 108 Back
65
Q 120 Back
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