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Kraft tries to curb fears over Cadbury’s future

February 2010

US food giant Kraft has pledged to maintain social responsibility programmes at the UK confectionery business Cadbury, which it will be buying for £11.9billion ($19.2bn, €13.7bn).

The takeover, agreed last month, has triggered fears that Cadbury’s emerging CSR policies could be ditched under a new corporate culture and through pressure to service a £7bn debt taken on to finance the deal.

Michael Osanloo, Kraft’s executive vice-president of strategy, said: ‘We are not foolhardy enough to do anything to harm the history of Cadbury and the integrity of the brands.’

Nevertheless, what will happen to Cadbury’s recent commitment to Fairtrade in some brands is uncertain. Kraft has worked on fair trade issues through the Rainforest Alliance, but Osanloo, who will be responsible for integrating Cadbury into Kraft, said: ‘Cadbury has chosen to go down the Fairtrade path, we have chosen to go down the Rainforest Alliance path. Both of those have a great deal of merit behind them.’

The UK-based Fairtrade Foundation confirmed last month that Cadbury would honour its deal to use Fairtrade chocolate in its market-leading Dairy Milk range, which is sold in the UK, Canada, Australia and New Zealand.

Kraft, however, has been careful not to make commitments to expand Cadbury’s use of Fairtrade cocoa beans into other brands – and the present deal under which Cadbury buys Fairtrade beans from Ghana is understood to be time-limited, enabling Kraft to end it when the contract finishes.

Other possible concerns are job losses and the impact of the takeover on the Cadbury Foundation, which the company funds via an annual multi-million-pound donation. ‘We don’t actually own Cadbury at this stage, so we need to understand more about all these things,’ said a spokesman.

Cadbury emphasised its CSR programmes in its attempt to fend off the hostile bid, which was accepted by shareholders last month. Todd Stitzer, Cadbury’s chief executive, played on the company’s Quaker roots and claimed its ethos was based on ‘principled capitalism woven into the very fabric’ of the organization.  Since the takeover was announced, the US website change.org has started a petition urging Kraft not to abandon Cadbury’s CSR policies.

Kraft is not generally viewed as being at the forefront of CSR, but it is on the Dow Jones Sustainability Index and has a history of addressing various issues in alliances with other food sector businesses. It has been part of slow-moving efforts by confectioners to deal with child labour on cocoa farms, has worked on obesity and water use as part of food and drink sector projects, and is the world’s biggest buyer of Rainforest Alliance-certified coffee.

Some commentators have suggested Kraft would be unwise to tamper with Cadbury’s successful formula. David Bailey, professor of international business strategy and economics at the UK’s Coventry University, said Kraft ‘needs to tread carefully so as not to damage the Cadbury brand with its emphasis on CSR and fair trade’. He warned: ‘Messing around with that will damage sales.’
 
see editorial p12




Kraft | Global | Mergers

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