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Business Acquisition: Kraft/Cadbury

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Kraft is a diverse company that, in 2009, made an acquisition to the confectionery group, Cadbury. However, this acquisition appears to have failed to create any value. What was the rationale used by top management to justify the acquisition when it was originally made? Why did the acquisition fail?

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Solution Summary

This solution discusses Kraft's acquisition of Cadbury confectionary company. It explains the rationale used by top management to justify the acquisition and why the acquisition failed. Supporting evidence and extensive references are included.

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In 2009 Kraft, known for confectionary, snacks and quick meals, made an offer for the British confectionery group, Cadbury. The initial offer by Kraft was intensely discussed throughout America and the United Kingdom; even leading some to suggest the British government implement an economic protectionist policy to avoid the takeover of British companies by non-British firms. A YouGov SixthSense survey found that 94 percent of the British population was aware that Cadbury was being sold to Kraft (Yougov, 2010). The decision to acquire Cadbury was made as part of the strategy of Irene Rosenfeld, the CEO and Chairman of Kraft Foods, as a way to drive growth and profits for the company.

Kraft Foods identified acquiring Cadbury as a way to strategically grow internationally with an existing successful brand, while utilizing Cadbury's resources as a way to develop the European market and expand the Kraft product range. In addition, Cadbury had a strong market presence in Brazil and India, which would be an additional benefit for Kraft. Kraft also planned to "channel Cadbury's Trident gum through Kraft's existing distribution and manufacturing systems" (Jose, 2010) in Brazil, Russia and China as well as push Kraft's products through Cadbury's network of small stores in Mexico and India. Kraft planned to take advantage of Cadbury's distribution in developing markets of India, Brazil and Mexico. Kraft's executives determined that as income rose in these markets, sales of Oreo's and confectionary items would grow (Awai, 2010).

Furthermore, Kraft feared Nestle and Hershey would join together, allowing its' competitors to have a larger share of the ...

Solution provided by:
Sally Baldwin, Ed.D
Education
  • BA, University of Southern California
  • MSS, United States Sports Academy
  • Ed.D, Boise State University
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