Kraft use Cadbury to spearhead growth
CADBURY and Kraft Foods are set to reach new levels neither could achieve on its own, the chief executive of the US company has said.
Speaking to Kraft shareholders as the company announced a tripling of its last quarter profits, Irene Rosenfeld said the challenge for both firms would be to deliver on promises of growth.
Analysts said the strong statement was needed in order to silence those on both sides of the Atlantic who had been critical of Kraft’s purchase of the Bournville chocolate maker, especially the high borrowing it had taken on in order to complete the £11.5bn takeover.
“We’re ready to take both Kraft Foods and Cadbury to a level neither could reach on its own,” Ms Rosenfeld told shareholders yesterday.
Investors will be keeping a close watch on the companies over the next few months to see if Kraft can build on its strong platform and convert revenue growth into profit.
Many are still sceptical of the company’s claims, believing it has taken on too much debt in order to fund the acquisition and that it over-valued Cadbury. This is despite many UK analysts claiming it acquired the chocolate maker on the cheap.
Among critics of the deal was billionaire Warren Buffett, whose Berkshire Hathaway is Kraft’s largest shareholder. He felt the asking price for Cadbury was too high and that Kraft stock was under-valued.
Kraft yesterday reported last quarter earnings of $710 million, up significantly on the $178 million recorded in the same quarter last year.
The company has credited the growth on a programme of cost-cutting and a decision to shed operations with poor returns.
Sales rose 3% to $11bn but were below forecasts of £11.7bn, which sent shares down.
Sales in North America and Europe dropped but revenue in emerging markets was stronger. It is to markets such as this that Kraft will now look to increase its market share, backed by the strong branding Cadbury offers.
Cadbury already has a presence in areas like India and South America, one of the reasons why Kraft was so keen to acquire it.
Ms Rosenfeld said Kraft was now looking to increase penetration of brands such as Oreo in markets in India, Mexico and South Africa.
She said Kraft was confident that with Cadbury on board it would become the global leader in sweet sales with a presence in every major region of the world.
