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Kraft's Bid for Cadbury: A Shift towards Faster Growth and Higher Margins

Strategic Insights

— 1 min read

Kraft Foods' bid for Cadbury PLC is part of a larger trend among big consumer-product manufacturers to reinvent themselves and drive growth in a slow-growth sector. Companies like Kraft, Procter & Gamble, and PepsiCo are pushing into new markets, making deals, and exploring online sales to boost their revenue. These efforts are driven by the need to counter the impact of the recession and growing competition from private-label brands.

Key Takeaways:

  • Kraft's bid for Cadbury is part of a broader effort to boost growth in a slow-growth sector, with companies like Procter & Gamble and PepsiCo also looking to expand into new markets and explore online sales.
  • The U.S. recession has made it urgent for these companies to reinvent themselves, with cheaper private-label brands gaining share in many categories and retailers fighting back against price increases.
  • Kraft CEO Irene Rosenfeld sees the Cadbury deal as a way to grow beyond traditional grocery stores, with Cadbury's candy brands allowing the company to sell more in convenience stores and gasoline service stations.
  • Companies like Procter & Gamble and Kraft have the advantage of having substantial cash on hand, giving them the flexibility to grow into new markets or make deals.
  • P&G's CEO, Bob McDonald, has emphasized the importance of growth, stating that the company will do what it takes to get the right portfolio of businesses and is focused on driving growth.
  • Companies like PepsiCo and Coca-Cola have also been exploring deals and growth strategies, with PepsiCo recently buying its largest bottlers and Coke signaling a willingness to make deals.

Statistics:

  • Kraft has lost share to cheaper competitors in some categories during the recession, although it reported a substantial jump in profits in the most recent quarter.
  • P&G has substantial cash on hand, which gives it the flexibility to grow into new markets or make deals.
  • According to Comtex's SmarTrend Alert, Kraft's stock price experienced a downtrend on 11-13-2008, while PEP's stock price experienced a downtrend on 11-12-2008.
  • The same Comtex SmarTrend Alert indicated a downtrend for P&G's stock price on 11-21-2008.

Sources:

  • Dow Jones Newswires; Anjali Cordeiro
  • Comtex News Network, Inc
  • www.mysmartrend.com (Comtex SmarTrend website)

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