In the 14 weeks since Kraft went hostile, Takeover Panel rules have limited Todd Stitzer and the Cadbury senior management team to now-tired rhetoric around Kraft's "derisory offer".
On Monday day 32 in the rigidly timetabled takeover process the former lawyer began his defence. Rejecting a campaign "rooted in history or wrapped in the union flag", CEO Stitzer set out ambitious targets for Cadbury as a pure-play confectioner: higher margins, bigger dividends and more cash generation by 2013.
In a lengthy and detailed presentation, Stitzer offered investors the substance they had been waiting for. But the outcome, he insisted, involved a personal choice, too. "In my experience, it's people who create strategies and people who deliver results," he said, throwing down the gauntlet to Kraft CEO Irene Rosenfeld. "This decision is about deciding which team of people can deliver what they say they can deliver."
Asking shareholders to choose their favourite Todd or Irene might seem to over-simplify a decision that must also be based on whether the advantages of pureplay confectionery beat the cost savings of a Kraft/Cadbury merger but it does serve the purpose of drawing attention to the relative track record of Cadbury and Kraft's current management teams.
And the numbers look good for Stitzer. Between his promotion to CEO in May 2003 and the day before Kraft's bid went public, Cadbury shares rose 46.8%, outperforming a peer group of food-industry rivals, including Kraft, in the process.
By contrast, Kraft's shares were 3.9% lower than on the day Rosenfeld joined Kraft in June 2006. Cadbury shares fell 1.5% over the same period, meaning the performance gap has actually widened since she took the helm.
Of course, Stitzer isn't just relying on his own counsel. He wheeled out several members of the senior global team for the investor presentations in London. And, in an exclusive interview with The Grocer this week, Stitzer also spoke of the substantial "upgrades" to the management in the past year as a result of the reorganisation of the business along global lines last year.
Cadbury appointed its first global procurement officer at the beginning of the year. Jean-Yves Rotté-Geoffroy, who joined from InBev, "has started to reorganise our procurement on a global basis," Stitzer explains. His appointment helped to emphasise the fact that while the cap-ex has been invested, much of the upside is still to come.
"Since the reorganisation, Cadbury has been globally negotiating its core input costs such as sugar, cocoa and milk. But further synergies have been identified. Flavours are currently bought from over 20 suppliers, £400m of packaging is bought from more than 100 companies and Cadbury's £70m IT support is supplied by global companies, but at local level. Why would you do that?"
Other new appointments include a new supply chain director, Tony Fernandez, who joined last year; Unilever's Stefan Bomhard, who joined as commercial director in July; and finance director Andrew Bonfield, who since his arrival in February has identified further cost savings. "We've been both replacing and upgrading talent," Stitzer says. "This gives good new input to help us procure in a more efficient way."
Stitzer is also looking for efficiency savings in the well-developed Western European markets, where growth prospects are relatively limited. He hints there is more scope to close factories.
Cadbury has 25 European factories, including six in the UK and two in Ireland. The company is looking to shift to European-wide production, with "centres of excellence" providing all the European supply for particular products, and "limited" local production. Sheffield is a centre of excellence for sugar confectionery, while Bournville has unsurprisingly been upgraded to a chocolate specialist.
"We closed a facility in Turkey and another in Barcelona earlier this year," says Stitzer. "We will also be closing the Somerdale factory on schedule. While no other consultation has taken place to date on any of our other factories, we are looking at another couple of opportunities [to close factories]."
Cadbury will also be focusing on product standardisation, but Stitzer stresses this need not mean a small, bland assortment of confectionery, identical in every market. For example, while chewing gum pellets will still be sold under different brands with slightly different ingredients, the pellet size will be standardised to cut down on machinery costs.
"We try to make things consistent where we can save the most, but differentiate on brand and flavour," he explains.
Stitzer admits Hershey has been in contact, but is at pains to point out that while a Hershey tie-up makes more sense than Kraft from a cultural perspective, the best future for Cadbury is an independent one. Though he wistfully admits ending the Hershey deal is a "wonderful thought", he's focusing on making the licensing partnership work.
This isn't due to lack of ambition, he says, but lack of opportunity: the US market isn't where the action's at, with the main growth coming from developing markets. "We've been very active with bolt-on-acquisitions.
"We bought the number one gum business in Turkey, the number one gum company in Africa and the number two chocolate company in Romania," he says. "We know what's available out there, and when we're finished with the current efforts around independence, we'll resume our focus on building our footprint."
While Cadbury is currently the number one confectioner in India, reaching around 30% of the billion-strong population, the opportunity is around consumption. Indians consume just 50g of chocolate (one Wispa bar) each year. Westerners chomp through 4.9kg almost 100 times as much.
What's more, confectionery is, Cadbury says, one of the foodstuffs most closely correlated with GDP growth: when people get richer, they eat a lot more. With GDP growth in India forecast at around 8% to 10% for the foreseeable future, that's a lot of potential.
Stitzer's case for independence comes down to one simple promise. An independent Cadbury will cut costs in the West and gun for growth in the East.
But there are feelings involved too Stitzer even evoked a famous Thomas Paine quotation from the War of Independence.
"The harder the conflict, the more glorious the triumph," he quoted. "What we obtain too cheap, we esteem too lightly; it is dearness only that gives everything its value."
Or in other words, if Kraft really does want Cadbury without a fight, it better pay a damn sight more.
Read more:
Cadbury confirms rival bid talk as war of words with Kraft heats up - 15 December 2009
Cadbury raises targets in formal Kraft defence - 14 December 2009
On Monday day 32 in the rigidly timetabled takeover process the former lawyer began his defence. Rejecting a campaign "rooted in history or wrapped in the union flag", CEO Stitzer set out ambitious targets for Cadbury as a pure-play confectioner: higher margins, bigger dividends and more cash generation by 2013.
In a lengthy and detailed presentation, Stitzer offered investors the substance they had been waiting for. But the outcome, he insisted, involved a personal choice, too. "In my experience, it's people who create strategies and people who deliver results," he said, throwing down the gauntlet to Kraft CEO Irene Rosenfeld. "This decision is about deciding which team of people can deliver what they say they can deliver."
Asking shareholders to choose their favourite Todd or Irene might seem to over-simplify a decision that must also be based on whether the advantages of pureplay confectionery beat the cost savings of a Kraft/Cadbury merger but it does serve the purpose of drawing attention to the relative track record of Cadbury and Kraft's current management teams.
And the numbers look good for Stitzer. Between his promotion to CEO in May 2003 and the day before Kraft's bid went public, Cadbury shares rose 46.8%, outperforming a peer group of food-industry rivals, including Kraft, in the process.
By contrast, Kraft's shares were 3.9% lower than on the day Rosenfeld joined Kraft in June 2006. Cadbury shares fell 1.5% over the same period, meaning the performance gap has actually widened since she took the helm.
Of course, Stitzer isn't just relying on his own counsel. He wheeled out several members of the senior global team for the investor presentations in London. And, in an exclusive interview with The Grocer this week, Stitzer also spoke of the substantial "upgrades" to the management in the past year as a result of the reorganisation of the business along global lines last year.
Cadbury appointed its first global procurement officer at the beginning of the year. Jean-Yves Rotté-Geoffroy, who joined from InBev, "has started to reorganise our procurement on a global basis," Stitzer explains. His appointment helped to emphasise the fact that while the cap-ex has been invested, much of the upside is still to come.
"Since the reorganisation, Cadbury has been globally negotiating its core input costs such as sugar, cocoa and milk. But further synergies have been identified. Flavours are currently bought from over 20 suppliers, £400m of packaging is bought from more than 100 companies and Cadbury's £70m IT support is supplied by global companies, but at local level. Why would you do that?"
Other new appointments include a new supply chain director, Tony Fernandez, who joined last year; Unilever's Stefan Bomhard, who joined as commercial director in July; and finance director Andrew Bonfield, who since his arrival in February has identified further cost savings. "We've been both replacing and upgrading talent," Stitzer says. "This gives good new input to help us procure in a more efficient way."
Stitzer is also looking for efficiency savings in the well-developed Western European markets, where growth prospects are relatively limited. He hints there is more scope to close factories.
Cadbury has 25 European factories, including six in the UK and two in Ireland. The company is looking to shift to European-wide production, with "centres of excellence" providing all the European supply for particular products, and "limited" local production. Sheffield is a centre of excellence for sugar confectionery, while Bournville has unsurprisingly been upgraded to a chocolate specialist.
"We closed a facility in Turkey and another in Barcelona earlier this year," says Stitzer. "We will also be closing the Somerdale factory on schedule. While no other consultation has taken place to date on any of our other factories, we are looking at another couple of opportunities [to close factories]."
Cadbury will also be focusing on product standardisation, but Stitzer stresses this need not mean a small, bland assortment of confectionery, identical in every market. For example, while chewing gum pellets will still be sold under different brands with slightly different ingredients, the pellet size will be standardised to cut down on machinery costs.
"We try to make things consistent where we can save the most, but differentiate on brand and flavour," he explains.
Stitzer admits Hershey has been in contact, but is at pains to point out that while a Hershey tie-up makes more sense than Kraft from a cultural perspective, the best future for Cadbury is an independent one. Though he wistfully admits ending the Hershey deal is a "wonderful thought", he's focusing on making the licensing partnership work.
This isn't due to lack of ambition, he says, but lack of opportunity: the US market isn't where the action's at, with the main growth coming from developing markets. "We've been very active with bolt-on-acquisitions.
"We bought the number one gum business in Turkey, the number one gum company in Africa and the number two chocolate company in Romania," he says. "We know what's available out there, and when we're finished with the current efforts around independence, we'll resume our focus on building our footprint."
While Cadbury is currently the number one confectioner in India, reaching around 30% of the billion-strong population, the opportunity is around consumption. Indians consume just 50g of chocolate (one Wispa bar) each year. Westerners chomp through 4.9kg almost 100 times as much.
What's more, confectionery is, Cadbury says, one of the foodstuffs most closely correlated with GDP growth: when people get richer, they eat a lot more. With GDP growth in India forecast at around 8% to 10% for the foreseeable future, that's a lot of potential.
Stitzer's case for independence comes down to one simple promise. An independent Cadbury will cut costs in the West and gun for growth in the East.
But there are feelings involved too Stitzer even evoked a famous Thomas Paine quotation from the War of Independence.
"The harder the conflict, the more glorious the triumph," he quoted. "What we obtain too cheap, we esteem too lightly; it is dearness only that gives everything its value."
Or in other words, if Kraft really does want Cadbury without a fight, it better pay a damn sight more.
Read more:
Cadbury confirms rival bid talk as war of words with Kraft heats up - 15 December 2009
Cadbury raises targets in formal Kraft defence - 14 December 2009
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