Tuesday, 19 January 2010

Cadbury sale not the last sweet in the packet

Today the Cadbury's board finally caved into an increased bid by the US food conglomerate Kraft. Unable to trust its shareholders to resist Kraft's offer, the UK chocolate manufacturer's board announced its support for the £11.5bn bid, worth 840p per share. This is a reminder that companies exist to create shareholder value, whatever their cultural role may be. The sale has not been popular in the UK media and with the UK government, with Enterprise Secretary Lord Mandelson, and then the Prime Minister himself warning Kraft that they do not want to see cuts in employment or production in the Cadbury business. However, perhaps Mandelson and Brown should not panic. We have been here before. Although Kraft purchased Terry's of York, the manufacturers of chocolate oranges in 1993 only to close UK production down in 2005, overseas multinationals generally have good form in the UK confectionery industry. In 1988 Rowntree Mackintosh, then the second largest UK manufacturer after Cadbury, was purchased by Nestle. Although Nestle stopped the UK production of Smarties at the Rowntree factory in York in 2006, the company continues to manufacture such best sellers as KitKat, Aero and Rolo chocolates in York, along with other sweets such as Fruit Pastilles, among others. Its also worth mentioning that the US company Mars has been producing chocolate at its Slough factory since 1932, with little production moved abroad. While chocolate is a commodity product of sorts, to improve the bars still relies on high level food science of the sort found in advanced economies such as the UK. Access to local supplies of milk is also important, while Cadbury's Bourneville factory in Birmingham remains ideally placed for food distribution. The UK remains an advanced market which demands luxury foodstuffs such as chocolate and there is little sign that demand is decreasing. Chocolate manufacture is an industry that is likely to remain in the UK for a long time to come.

Research Note: The Business Archives Council is currently acting to secure the Cadbury's archive.


  1. Great news about securing its archives.

    With the rising number of fat people in the UK (myself included), chocolates are indeed a growth industry.

    But perhaps missing (or at least implicit) in the discussion in the media is that this industry is also looking for economies of scale. The likes of Nestle and Cadbury no longer plant and collect cacao but concentrate in mixing, marketing and distribution while buying the basic mix/pulp from producers in Brazil or Malaysia.

  2. Yeah, that's a fair point, there is no need to directly invest when the raw materials can be sourced cheaply.

    No idea if the archive will actually be saved, but they are trying to do it.



About Me

London, United Kingdom
I'm Lecturer in Management at The York Management School, at The University of York, UK. I teach strategic management to undergraduate and masters students, as well as running the masters dissertation module. My research focuses on business and management history.