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.
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.
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. 
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.
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. Kraft
subsequently confirmed that total redundancy payments for the
320 employees to whom redundancy applied amounted to some £32m.
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
Pay and conditions in general
57. The undertakings given generally in relation
to pay and conditions were:
- To maintain existing staff terms
- That existing pension arrangements would be honoured;
- To engage in genuine union consultation.
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
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
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.
There has been substantial press comment on the "brain drain"
away from Cadbury including from former Cadbury executives.
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.
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.
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;
- To continue Cadbury Foundation funding;
- To continue Cadbury's community and charitable
- To stand by Cadbury's London Olympics sponsorship.
66. It would appear from the Progress Report
and from oral evidence that these undertakings are being fully
66 See Q 251, 16 March 2010, Firestone: "Does
Kraft stand behind the programmes that are in place for the colleagues
there? Yes." Back
Progress Report, paragraphs 23-24 Back
Q 43 Back
Ibid., and Q 168 Back
See Annex Back
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
16 March 2010, Q 322 Back
Qq 305 and 324, ibid. Back
Q 145 Back
Guardian, 4 March 2010, 'Unions square up to Kraft to demand
pay rise for Cadbury workers' Back
Q 96 and Q 100 Back
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
Q 125 Back
As discussed, for example, in Financial Times, 15 March
2011, 'Sweet growth still tastes sour' Back
16 March 2010, Q 327 Back
Q 334, ibid. Back
Qq 338 and 339, ibid. Back
Qq 186 and 187, ibid. Back
Report, paragraphs 25-38 , and Qq 169 and 170 Back