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

5  Kraft's undertakings on pay and conditions and on community matters


52.  The Somerdale factory was originally built by J.S. Fry & Sons but became part of Cadbury as a result of a merger of the two companies in 1919. A major factory redevelopment at Somerdale was begun following World War I, and the Quaker tradition of both businesses meant that the new factory, the one still standing, was built with social facilities and a sports ground alongside (the "Fry Club").

53.  After its reversal of position on Somerdale, Kraft indicated that it would stand behind the programmes that Cadbury had put in place for Somerdale employees.[66]

54.  Somerdale closed in early January 2011. Kraft's progress report told us about support for ex-employees by way of redundancy packages, re-training, and advice on job seeking. It said:

A number of employees have had support from Business Link to help them set up their own business; 200 have registered with the outplacement agency and 60 have now found other employment; around 50 are retiring or taking career breaks; 20 are relocating to other Kraft sites. […]

The factory has recently stopped production, and we have been working closely with local authorities to come up with a blueprint for the future use of the site. This will provide both housing and employment opportunities. [67]

55.  In evidence, Nick Bunker, President of Kraft Foods for UK and Ireland, told us that 100 former Somerdale employees have now found jobs elsewhere (26 in other Kraft facilities), while 80 have retired.[68] He said that the Somerdale site would go on the market later in March 2011, and that the Fry Club would be maintained and, if necessary, rebuilt in accordance with terms that had been agreed with the club.[69] Kraft subsequently confirmed that total redundancy payments for the 320 employees to whom redundancy applied amounted to some £32m.[70]

56.  We broadly welcome Kraft's approach to supporting former Somerdale workers to find employment. We trust that that support will continue to be delivered in a way that fully does justice to the long-standing loyalty of those workers.

Pay and conditions in general

57.  The undertakings given generally in relation to pay and conditions were:

  • To maintain existing staff terms and conditions;[71]
  • That existing pension arrangements would be honoured;[72]
  • To engage in genuine union consultation.[73]

58.  The progress report did not mention pay and conditions elsewhere than at Somerdale. In the oral evidence session, Kraft told us that as of March 2011 pay and conditions had not changed and that it was "unequivocally" honouring the commitment.[74] However, Kraft was about to launch a pay and conditions 'harmonisation' exercise between itself and Cadbury. Nick Bunker told us:

I stress that the project is to harmonise. It is not a cost-saving project, but it is a project to try to bring our new combined workforce on to a framework that is consistent […] across the business.

59.  We have since learned informally that this initiative was previously unknown to Unite, the union at Cadbury. In view of the undertaking on union consultation, that is rather regrettable. We understand that Unite has written to Kraft seeking further details of the harmonisation exercise. In light of the concerns expressed in the press after takeover[75] that the unions did not expect a large number of manufacturing jobs at Cadbury to be axed in the short term, but instead feared that Kraft would squeeze costs by cutting pay and conditions, we trust that the reply will be suitably reassuring.

60.  Disappointingly, a large proportion of Cadbury senior executives have left, and there remain no Cadbury employees on the Kraft executive team.[76] There has been substantial press comment on the "brain drain" away from Cadbury including from former Cadbury executives.[77] When asked about this, Kraft were keen to stress more favourable statistics such as the two thirds of Kraft senior management who come from Cadbury, but we cannot help feeling that some of the soul of Cadbury has already been lost. We very much hope that it can be recovered.

61.  Kraft is anticipating synergies of some $750m in costs and $1bn in revenue growth from the merger.[78] There is concern that costs savings will be achieved at the expense of jobs or pay and conditions once the two-year commitments have expired, particularly in view of Kraft's levels of corporate debt.[79]

62.  Whilst we acknowledge that sensible synergies must be sought, we expect Kraft in deciding on where to make savings to bear in mind its particular responsibility to Cadbury workers in light of events of the past 18 months, as well as other factors such as the proceeds that will result from sale of the Somerdale site.

63.  We expect Kraft to honour its earlier commitment on pay and conditions alongside and in addition to its further commitment not to make the current harmonisation exercise one with an objective of cost cutting. It should fully involve the union in that exercise.

64.  We trust that redeployed workers such as those moving from Uxbridge or from Cheltenham to Bournville are being offered pay and conditions consistent with Kraft's undertakings.

Community and other matters

65.  These undertakings were:

  • To move Green & Black's to Fair Trade by the end of 2011;[80]
  • To continue Cadbury Foundation funding;[81]
  • To continue Cadbury's community and charitable activities;[82]
  • To stand by Cadbury's London Olympics sponsorship.[83]

66.  It would appear from the Progress Report and from oral evidence that these undertakings are being fully complied with.[84]

66   See Q 251, 16 March 2010, Firestone: "Does Kraft stand behind the programmes that are in place for the colleagues there? Yes." Back

67   Progress Report, paragraphs 23-24 Back

68   Q 43 Back

69   Ibid., and Q 168 Back

70   See Annex Back

71   The bid materials said: "[W]e confirm that the existing contractual employment rights, including pension rights, of all employees of Cadbury would be fully safeguarded." See also Q 321, ibid. Back

72   16 March 2010, Q 322 Back

73   Qq 305 and 324, ibid. Back

74   Q 145 Back

75   Guardian, 4 March 2010, 'Unions square up to Kraft to demand pay rise for Cadbury workers' Back

76   Q 96 and Q 100 Back

77   For instance, Financial Times, 20 March 2010,'Cadbury executives join top team', Economist, 27 March 2010, 'Small Island for Sale', Independent, 22 April 2010, 'Cadbury's ad mastermind baulks at Zurich', Guardian, 22 April 2010, 'Drum roll: Cadbury gorilla guru goes', Financial Times, 28 May 2010, 'Kraft hit by exodus of Cadbury executives', Independent, 5 July 2010, 'Cadbury's jobs fears realised as Kraft wields axe', Daily Telegraph, 6 July 2010, 'Kraft cuts 75pc of Cadbury senior staff', Mail on Sunday, 25 July 2010, [insert title], The Grocer, 7 August 2010, 'Former Cadbury exec Alex Cole lands top media role at Freud agency', Sun, 3 February 2011, 'I've Cad enough-One of the last remaining', The Grocer, 19 February 2011, 'One year on, can Kraft now celebrate its Cadbury deal?' Back

78   Q 125 Back

79   As discussed, for example, in Financial Times, 15 March 2011, 'Sweet growth still tastes sour' Back

80   16 March 2010, Q 327 Back

81   Q 334, ibid. Back

82   Qq 338 and 339, ibid. Back

83   Qq 186 and 187, ibid. Back

84  Progress Report, paragraphs 25-38 , and Qq 169 and 170 Back

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Prepared 23 May 2011