Cadbury may’ve rejected US food giant’s Kraft’s initial £10.2bn offer — which valued Cadbury at over 30 times over last week’s closing price — but as far as analysts are concerned, it now has a bullseye on its back. Kraft’s boss Irene Rosenfeld was quoted as saying she thought Cadbury might struggle if it goes it alone in the current market.
Why? Last year’s demerger was a costly exercise executed as developed economies were starting to tank. It lost its number-one confectionery company title to Mars-Wrigley. Its recent history’s been dotted with product problems.
But Cadbury’s brand value — particularly its heritage — remains intact, whereas Kraft (d.o.b 1903) was bought and extended to become what Carl Mortished in the Times describes as “just a big American food company — profitable, but dull.”
But is Kraft pursuing Cadbury for its blue-blooded brand? The UK company has more tangible attractions — market share, presence in emerging markets.
But a lot of its success is tied directly to its intangible assets — its brand. This is why so many in the UK object to the idea of it being swallowed up — yet another example of Britain selling the family silver, say those against acquisition.
And Cadbury’s early corporate paternalism may read as patronising today, but its reputation as a pioneer of social awareness has helped it weather more recent dents to its employer image.
Even its products rely on heritage: the business’s real value still resides in chocolate Cadbury’s been making since 1897. This has kept the business bouyant of late. It’s the traditional chocolate bars that buyers care about.
Discussing Cadbury’s half-year results, CEO Todd Stitzer seems to have a handle on this. He makes great play of the fact that Cadbury-owned Adams and Chiclets brands have been selling in Brazil for 20 years, and that cocoa plants in India are also known (cringingly) as ‘Cadbury trees’.
But what does this add up to in terms of brand equity? How do you measure the implied value inherent in the business’s products, its reputation? It’s an obvious question, but why has Cadbury’s measured value — share price — risen from 550p in May to 786p on the back of outsiders’ interest?
Kraft may well be basing its valuation of Cadbury on heritage. And there’s a (sliver of a) possibility that Cadbury’s favoured products may even retain their cachet after acquisition.
But it won’t be a British business anymore. Does it matter? Let us know what you think.
(Pic: Svadilfari cc2.0)
