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


Conclusions and recommendations


Kraft representation before the Committee

1.  The areas that principally concern this Committee in relation to Cadbury are Kraft's company strategy and its intentions with regard to UK jobs, and it is Irene Rosenfeld, as its Chief Executive Officer and Chairman, in whom Kraft has invested the principal authority to make announcements on such matters. For that reason, we believe that she should have made herself available as her company's principal witness. The manner of her repeated refusal to appear before a committee of Parliament demonstrates a regrettably dismissive attitude to a National Parliament—an attitude which we trust Kraft will rapidly take action to shed. (Paragraph 16)

2.  It was deeply frustrating that so much time was spent on the issue of Ms Rosenfeld's non-attendance which ultimately overshadowed some of the positive developments in Cadbury. That situation could have been avoided had Kraft taken a more positive role in its engagement with the Committee. If Kraft's decision was driven by advice on public relations, that decision backfired. (Paragraph 17)

Takover panel decision

3.  The Takeover Panel decision found that Kraft did not have an objectively reasonable basis for its statements on Somerdale, vindicating the view of our predecessor Committee that Kraft acted both irresponsibly and unwisely in making its original statement on Somerdale. A company of Kraft's size and experience ought to have acted with better judgement. (Paragraph 36)

4.  The Takeover Panel criticism of Kraft was a serious matter. The Committee totally rejects the interpretation of the Panel's decision by Mr Firestone and presumably by Ms Rosenfeld herself. The Panel decision alone merited the appearance of Kraft's CEO before the Committee. (Paragraph 37)

Changes to the Takeover Code

5.  Based on the experience of the Cadbury takeover, we believe there is a strong case for making pre-takeover statements about matters such as whether factories will be kept open binding for a defined period. We therefore welcome the proposed changes to the Takeover Code in that respect. The proposals on the timeframe for bids are also worth singling out as particularly welcome. (Paragraph 40)

6.  We recommend that the Government use the Kraft Takeover of Cadbury as a valuable case study when the Government comes to formulate its policy in this area, and we look forward to scrutinising its policies when they are published. (Paragraph 41)

Kraft's undertakings

7.  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. (Paragraph 50)

8.  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. (Paragraph 51)

9.  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. (Paragraph 56)

10.  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. (Paragraph 62)

11.  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. (Paragraph 63)

12.  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. (Paragraph 64)

Conclusion

13.  So far, Kraft appears to have honoured most of the spirit and letter of the undertakings that it gave to the previous Business, Innovation and Skills Committee, although we are concerned about the upcoming pay harmonisation and the shift of marketing management to Zurich. However understandable the latter might be, it does not sit entirely comfortably with the commitments to manage brands out of the UK. (Paragraph 67)

14.  We are encouraged, however, by the recruitment that Kraft is undertaking, by its commitment to research in the UK and by its wish to "invest its way to profitability". Whilst Kraft did not extend its undertakings on jobs, the strong indication to us was that the extent of investment at Bournville and other sites would only make sense alongside retention of employment levels in the UK. We trust that our interpretation is correct. If it is not, we shall expect any change in the position to be made public by Kraft at the earliest opportunity. (Paragraph 68)

15.  Our overall conclusion, therefore, is that, while there remain some significant concerns about Kraft takeover of Cadbury, a number of positive signs may be beginning to emerge. Those positive messages would have been considerably more convincing if conveyed directly to bodies such as ourselves from the top of the organisation. As for the future, Kraft's witnesses asked us to judge Kraft on its deeds. We shall. (Paragraph 69)


 
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Prepared 23 May 2011