Global Marketing Ethics and Culture: Takeover Bid of Cadbury’s by Kraft Foods

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Culture has a profound impact on global marketing. To start with, culture is a fundamental aspect of business negotiations. Secondly, culture affects the demand for both products and services in the market. Moreover, culture may act as the unforeseen entry barrier for an organization to a foreign market, and more so for the international market. Thankfully, this barrier can be overcome through hard work, cultural sensitivity, and quality products. This paper shall explore the issues of business culture and ethics and the way they impact global marketing. Specifically, the paper shall examine the takeover bid of Cadbury’s by Kraft Foods. Accordingly, the writer shall endeavor to assess the factors that could have led to Kraft having an interest in the acquisition of Cadbury’s. The importance of the takeover bid to both parties shall also be assessed, along with the implications that such an acquisition might have on the combined organization’s stakeholders.

What markets are both companies in?

Kraft Foods Incorporated is a company that has been listed on the NYSE (New York Stock Exchange). KFC as it is popularly called is the world’s second-largest manufacturer of food, confectionery, and beverage, after Nestle. The company has various brands to its name, and these are marketed in over 155 countries globally. On the other hand, Cadbury plc, a UK-based company, is ranked as the second-largest manufacture of confectionery in the world, after Mars/Wrigley. At the moment, a takeover bid for the company by Kraft Foods has already been formalized (Tathagata & Durojaiye 2010 par. 5).

Why would Kraft be interested in Cadburys?

There are various reasons why a company would want to acquire the business of its competitor. Besides the need to increase its market share, an organization could acquire a rival company to penetrate certain segments of the market that might have hitherto remained unreached. A takeover bid for Cadburys by Kraft would mean that the latter would now become the market leader in the confectionery manufacturing segment. At the moment, Mars has the highest market share in the global confectionery industry. Mars assumed this position in 2008, following its successful takeover bid for Wrigley, another manufacturer of confectioneries. In 2008, the global confectionery market was valued at $ 167 billion, and Mars controlled 14.5 percent of the global confectionery market (Ziyal, 2009, par. 1). With a merger of Kraft and Cadbury, the new conglomerate would have a combined market share of 15 percent, effectively eclipsing that of Mars. However, an increase in its market share is not the only critical reason why Kraft is interested in Cadburys. Rational financial strategies were employed by Kraft in its quest to acquire Cadbury’s. In this regard, Kraft anticipates that the inclusion of the wide range of products from Cadbury shall help the new conglomerate to attain a high-profit margin. Moreover, Kraft anticipates that following this acquisition, the company shall obtain significant revenue synergies. In addition, Kraft anticipates obtaining approximately $ 625 million in terms of annual pre-tax cost savings. Such an ambitious cost-saving measure will facilitate the company’s growth targets. Experts also concur that the takeover bid for Cadbury by Kraft Foods indicates the craving for additional growth categories by marketers from the United States (Tathagata & Durojaiye, 2010, par. 2).

In terms of marketing prospects, Kraft anticipates that by taking over Cadbury, the annual synergies for the combined entity could amount to approximately $ 675 million, on an annual basis. On the other hand, industry experts have projected an increase in the annual revenues of Kraft by $ 50 billion. This would effectively enhance the growth prospects for Kraft, notably the acquiring of new brands and more so in the attractive and equally lucrative confectioneries segment. In 2008, operating margins for Kraft were at 9 percent. With reports indicating that confectionery products have an even higher margin than this, the expectation is that the takeover bid shall indeed enhance Kraft’s profit margin. New channels of distribution for Kraft products are also expected to emerge. It is important to note that up to this point, the presence of Cadbury’s in foreign markets has proved quite an attractive venture. Kraft is also thought to crave the profitable brands of Cadbury’s along with the access that the company has to various economies, especially the emerging ones. The argument is that whereas the cheese and macaroni brands that Kraft offers may be successful in the United States, this does not necessarily have to be the case in such emerging economies as India and China (Steverman 2009, par. 4).

In the years that it has been in operation, Cadbury has managed to establish a global network that enables the company to effectively reach its market in the emerging economies. It is this market that Kraft is so keen on reaching. As multinational corporations, both Cadbury’s and Kraft provide their products to the major markets around the globe. However, in Ireland and the UK, the chocolate confectionery segment is dominated fully by Cadbury. Here, the preference amongst consumers is on British-style chocolate in place of chocolate manufactured based on continental tastes. In this case, the market share of Kraft in the chocolate industry is very low. Therefore, taking over Cadbury’s Kraft would be boosting this market share. Kraft believes that the organics growth in revenue for the combined company would be exceeding their current target by more than 5 percent. In addition, Kraft also anticipates that its sustainable EPS (Earning per share) would increase by a growth factor of between 9 and 11 percent. Besides, Cadbury’s acquisition will facilitate balancing the geographical footprint of Kraft. This is in addition to augmenting the company’s contribution to the developing market, where Cadbury’s appears to have had a strong foothold with its confectionery products. Accordingly, an acquisition of Cadbury is estimated to result in an increase of net revenue to Kraft by between 20 and 25 % (Value expectations, 2009, par.6).

What are the advantages and disadvantages for both parties?

Following the completion of the deal has resulted in Kraft taking over Cadbury’s, the former appears to have benefited the most. To start with, Kraft shall greatly benefit from savings on cost. Thanks to its larger size now, the group’s profitability is poised to increase, following a cost-saving measure to the tune of $ 675 million on an annual basis. In this case, Kraft investors can anticipate a higher return on their investment. Between the two firms, Kraft appears to be keen to have the deal sealed. Aside from the acquisition helping Kraft to increase its growth in revenue target by 5 percent, and a further 2 percent in EPS (earning per share), Cadbury’s shall also be bringing onboard a lot of strength in the emerging market. This is the case in part because, within the emerging markets (that is, Brazil, India, and China), Cadbury’s can boast of an effective brand positioning of its products. On the other hand, Kraft has been performing rather dismally in these areas. This is even though Kraft is four times as big as Cadbury’s in terms of size.

The bid for Cadbury by Kraft is already raising a lot of concern regarding what is to become the future of the iconic brands by the British manufacturer of chocolate (Hooper 2010, par. 1). To start with, there is fear that the new owners would attempt to alter the taste and flavor of their chocolate to have an American taste. If this were to happen, then the iconic chocolate brands manufactured by Cadbury could be faced with a lack of popularity, especially in Ireland and the UK. In addition, there is the impending loss of an iconic British brand as a result of the takeover bid for Cadbury’s by Kraft. On the contrary, a Cadbury/Kraft merger could also result in a “global powerhouse” within the food and confectionery sector. Kraft estimates that the combined company could realize approximately $ 50 billion in terms of annual sales. Irene Rosenfeld, the CEO (chief executive officer) of Kraft asserts, “This proposed combination is about growth. We are eager to build upon Cadbury’s iconic brands and strong British heritage through increased investment and innovation” (Adetunji 2010, par. 9). The CEO further asserts that Kraft greatly admires and respects the leadership at Cadbury, its employees, and the company’s rich and product history of 186 years. Indeed, Cadbury’s shall greatly complement Kraft’s product portfolio but whether the CEO of Kraft and her company intends to honor their pledge remains to be seen. On the other hand, Cadbury stands to benefit from the global scale and scope of market penetrations that Kraft enjoys. Moreover, the proprietary processes and technologies that define Kraft are many and varied, and this shall greatly boost the performance of Cadbury’s brand.

Arising ethical issues

There are ethical issues that surround the takeover bid for Cadbury’s by Kraft. British MPs are already sounding a warning that Kraft’s takeover bid for Cadbury could be a disaster that may translate into the loss of thousands of jobs. In addition, it is also anticipated that owing to the great difference in terms of the existing cultural variation between the United States and the UK, striking a perfect balance to cater for both parties could prove futile, and this may very well jeopardize the success of the anticipated merger (Wearden, 2010, par. 2). The takeover has already been labeled by industry experts as a hostile acquisition. Statistics indicate that such kinds of the takeover have an 80 percent chance of failure. This is mainly attributed to a lack of common culture for the parties involved. An imminent mass restructuring and redundancies exercise loam large, as Kraft endeavors’ to realize savings to the tune of $ 1.5 billion. This would mean that the jobs of thousands of workers would be at stake. Cadbury has been dubbed a global success story with British roots. Accordingly, the Britons view it as a national heritage whose philanthropic activities are admirable.

The management at Cadbury is fearful of an asset-stripping and cost-cutting measure by Kraft, and rightly so. Historically, Kraft has been known to employ this principle in its quest to reduce its operational costs. In 1993, Kraft bought Terry’s, another chocolate maker in the UK. Before the purchase, the company had agreed that it would ensure that the factory at York would remain open. However, in 2005, Kraft closed down this factory, and all production was moved overseas. The loss of jobs is not the only ethical concern surrounding Cadbury’s takeover bid. Cadbury Foundation, the charitable arm of the company faces a bleak future. There is a lot of concern about what will become of the charitable arm of Cadbury’s should the new owners decide not to fund it. Besides the attributes of a good employer and the manufacturer of chocolate, Cadbury has been committing £10m every year to charity.

What are the implications to the stakeholders?

Although Cadbury’s top line results have remained impressive, nonetheless, the company has failed to record improved margins, and this has been a real concern to the shareholders. With the acquired market share of 15 percent, the combined firm shall in effect become the leading manufacturer of confectioneries in the world, in terms of market share, ahead of Mars/Wrigley. The global operation capabilities and flexibility of the new firm shall also ensure that the shareholders who have a stake in Cadbury’s get a considerable premium for the value of their investment (Swanson 2010, par. 6). On the other hand, the stakeholders at Cadbury are faced with the possible risk of a decline in the price of their shares as a result of the acquisition. Consequently, their fair value estimate would have to be reduced to a ‘stand-alone valuation’. In addition, attempts to restructure the firm, and which are still in progress would be thwarted by the acquisition, and this shall impact the firm’s operations and by extension, interfere with the share price of the company’s stocks (Value Expectations 2009, par. 2). Another concern worth mentioning is the constant rise in commodities prices especially that of cocoa sugar or fuel costs. There is a need to appreciate the fact that almost 40 percent of the total sales that Cadbury makes emanates from both the emerging and developing markets. Given that Kraft does not at the moment perform as well as Cadbury’s does in these markets, the ensuing economic and political climates might affect the sales of the combined company, and this shall further hurt the shareholders’ return on investment.


The takeover bid for Cadbury’s by Kraft foods has been regarded as a hostile move due to the ethical, economic, and social factors involved. Considering that this is more of a global marketing issue amongst corporations from two different cultures, there is a need to ensure that the combined company strikes a balance between the American culture and the British one to sustain market demand for their products. In addition, this will also enhance business negotiations, in addition to reducing the hitherto unseen entry barriers to the markets where one of the individual companies may have previously had a fading presence.


Adetunji, J 2010, “Concern over Cadbury’s charitable roots”, Guardian Public. Web.

Hooper, S 2010, “How would takeover affect Cadbury’s taste?”, CNN. Web.

Swanson, E 2010, “Morningstar view: we believe Kraft’s offer is a great deal for Cadbury’s shareholders’, Morning Star. Web.

Tathagata, R, & Durojaiye, O 2010, “Acquisition by Kraft: What Does the Market Hold for Cadbury? “, M2Online. Web.

Value Expectations 2009, “Kraft Foods Inc (NYSE:KFT) acquisition analysis of Cadbury Plc (NYSE:CBY)”, Value Expectations. Web.

Wearden, G 2010, “Cadbury takeover likely to be a ‘disaster, MPs warned’, Guardian. Web.

Ziyal, T 2009, “What landing Cadbury mean for Kraft, Ferrero, Hershley”, Get Food News. Web.

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