London's investment banking industry has a lot to thank Irene Rosenfeld for. Starved of salivating mergers to get their teeth into during the financial crisis, there's now a new golden ticket for the City to play with: Kraft's £10bn offer for Cadbury.
A call to the mobile phone last month of Roger Carr, chairman of Cadbury, by Rosenfeld, chairman and chief executive of Kraft, came like a bolt from the blue - but perhaps it should not have been so surprising.
Speculation about Cadbury's purchase or merger with a US rival has done the rounds on City trading floors for years. The company has an international footprint that makes it the most coveted of the ‘available' global confectionery manufacturers, with a strong presence in fast-growing markets in Asia, Latin America and Russia - something Kraft lacks by comparison.
Make no mistake about the timing
of Kraft's move either: Cadbury's recent marketing excellence is a compelling ingredient in the secret recipe that the US food company wants to gets its hands on.
Cadbury's shareholders justly backed the company's board in resisting Kraft's initial approach. The frenzy of brand awareness generated by the Dairy Milk ‘Gorilla' ad of 2007, which rapidly went viral and transformed consumer perceptions, is not easily generated.
While ‘Trucks', the successor to ‘Gorilla', was not in the same league, ‘Eyebrows', which launched earlier this year, marked a return to form, judging by its warm reception among the YouTube generation.
Similarly, the revival of popular ‘retro' brands such as Wispa as well as variant launches have restored a reputation for innovation that many of Cadbury's FMCG rivals have lacked
for some time.
One obstacle Kraft will not have to face is the challenge of buying a company that has wrapped itself in its national flag. Lord Mandelson, the business secretary, has made it clear that he is keeping a ‘weather eye' on the trend in which blue-chip British companies have fallen into the hands of foreign predators. However, given the sensitivity of the threat to so many manufacturing jobs in the run-up to
a general election, Mandelson was probably thinking of the ownership of Vauxhall, rather than Cadbury, when he made his remarks.
What is next for the confectionery group? The Takeover Panel, which oversees merger activity in the UK, has given Kraft until 9 November to submit a formal bid. There remains the possibility of another bidder coming forward to offer its hand to Cadbury. Hershey, for instance, is examining the prospect, but would need to find a partner with some financial muscle to have a credible chance of funding a bid to trump Kraft.
Of the other multinational food companies, Cadbury is not a natural fit with either General Mills or PepsiCo, while for Nestlé the fit is almost too good - it would be unable to swallow Cadbury on its own for anti-trust reasons. Similarly, while Mars might be interested in certain Cadbury brands, it is not going to ride in as a white knight for the whole company.
Kraft's initial offer was worth 745p a share on the day it was announced, but has fluctuated since then due to shifts in currencies and its own share price. This will have to be raised considerably for Cadbury's board to recommend it.
Rosenfeld's favourite Cadbury product is reportedly the Creme Egg. To get her hands on it, she will need to pay a price that reflects the fact that its maker is a genuine gorilla of the consumer goods jungle.
Mark Kleinman is City editor at Sky News and a columnist for The Times
30 seconds on Kraft Foods
- In 1903 Canadian-born James L Kraft started a wholesale door-to-door cheese business in Chicago.
- After losing $3000 in its first year, the business became a success, and JL Kraft and Bros was formed in 1909.
- The company invested in marketing and NPD and, by 1914, it was selling 31 varieties of cheese around the US.
- Through various mergers and acquisitions, by the 60s the brand had diversified to include products such as sauces, desserts, and ready meals, and expanded heavily into international markets.
- In 1988 it was bought by Philip Morris (renamed Altria since 2003), which merged it with its General Foods unit. The business continued to expand with the acquisition of Jacobs Suchard (ownersof the Toblerone and Kenco brands) in 1990 and Nabisco Holdings in 2000.
- Kraft Foods is now the world's second-biggest food and drink business, after Nestlé.
- Its brands include Dairylea, Ritz crackers, Philadelphia cream cheese, Oreos and Terry's Chocolate Orange.