Why go back to the Cadbury take-over by Kraft! Stale news isn’t it? At least three weeks old! Sadly that’s how an insatiable media world makes us think, when really we’ve hardly begun to digest the Cadbury lesson. What lesson is that? Well, a simple one – a lesson about greed; its huge destructive power, its institutionalized grip on the nation and its disastrous outcome. It massively underlines the Amos message (article 1 website)
When it cast its covetous eyes on Cadbury, Kraft was already “stuffed full of such big names as Maxwell House coffee, Toblerone, Ritz crackers etc. etc” which it had gobbled up. But much wants more. Cadbury had an international brand and distribution channels where profits were high. Acquiring it would take Kraft’s revenue growth from 4% to 5%. It was an ideal target to make Kraft the world’s largest sweet maker with sales of $50 billion. Pressure from its equally greedy competitors compelled action. Pure greed!
What about the Cadbury end of the deal? The decision to sell came when the short term profit seekers and hedge funds saw time was ripe for a fat profit on their shares; when the Kraft price (deliberately driven up) was right! The senior Cadbury management had nothing to loose, indeed the CEO could make about £12 million on the deal. Other interested parties, banks, lawyers, accountants etc, very accurately likened to wheeling vultures, saw they could rip the carcass for about £250 million in fees. Raw greed!
What about the fall-out? Kraft borrowed a massive $7 billion to fund its bid for Cadbury (a real bonanza for financiers!). It will have to be paid back. How? Sales alone will not pay for it. It means asset stripping and rationalization, which on the ground means unemployment and economic shrinkage. Recent history demonstrates conclusively the inevitability of that scenario. Thus, in Amos words, “the rich sell the poor for a pair of shoes”. When Cadbury people are eventually laid off it will have been to give investors an extra 50p on their share value - much less than a pair of shoes. There is absolutely no recognition of this outcome in the deal. Economic growth, stability and the welfare of workers simply did not figure in any calculation.
The government watched in supine manner; Lord Mandelson washed his hands of it and said it was up to the shareholders, and Gordon Brown said he would make strong representations for the workforce, knowing he was utterly powerless. There was complete weakness in the face of corporate greed.
Of course we have not seen the end of economic downturn! Greed has brought it about and will deepen it. That process itself constitutes a judgement, but will undoubtedly spark something far worse.
Bob
When it cast its covetous eyes on Cadbury, Kraft was already “stuffed full of such big names as Maxwell House coffee, Toblerone, Ritz crackers etc. etc” which it had gobbled up. But much wants more. Cadbury had an international brand and distribution channels where profits were high. Acquiring it would take Kraft’s revenue growth from 4% to 5%. It was an ideal target to make Kraft the world’s largest sweet maker with sales of $50 billion. Pressure from its equally greedy competitors compelled action. Pure greed!
What about the Cadbury end of the deal? The decision to sell came when the short term profit seekers and hedge funds saw time was ripe for a fat profit on their shares; when the Kraft price (deliberately driven up) was right! The senior Cadbury management had nothing to loose, indeed the CEO could make about £12 million on the deal. Other interested parties, banks, lawyers, accountants etc, very accurately likened to wheeling vultures, saw they could rip the carcass for about £250 million in fees. Raw greed!
What about the fall-out? Kraft borrowed a massive $7 billion to fund its bid for Cadbury (a real bonanza for financiers!). It will have to be paid back. How? Sales alone will not pay for it. It means asset stripping and rationalization, which on the ground means unemployment and economic shrinkage. Recent history demonstrates conclusively the inevitability of that scenario. Thus, in Amos words, “the rich sell the poor for a pair of shoes”. When Cadbury people are eventually laid off it will have been to give investors an extra 50p on their share value - much less than a pair of shoes. There is absolutely no recognition of this outcome in the deal. Economic growth, stability and the welfare of workers simply did not figure in any calculation.
The government watched in supine manner; Lord Mandelson washed his hands of it and said it was up to the shareholders, and Gordon Brown said he would make strong representations for the workforce, knowing he was utterly powerless. There was complete weakness in the face of corporate greed.
Of course we have not seen the end of economic downturn! Greed has brought it about and will deepen it. That process itself constitutes a judgement, but will undoubtedly spark something far worse.
Bob
P.S. **Ten hours after this column was published Kraft announced the closure of Cadbury's Keynsham factory with some 400 job losses.
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Is this a judgement on us or the actions of the evil one? God loves us all but has given us free will. Sadly free will leads to greed and damage to those who least deserve it. Also sadly in this world there are still too many people who cannot bring themselves to live a life of service and love. Power is hard to win but breeds contempt and a loss of any sense of what is right for community. Service on the other hand is equally hard to win and is equally at risk of being treated with contempt by those who sit on the sidelines watching and waiting. Waiting for a slip or trip, to point the finger and use any sign of weakness to discredit those who try and fall short. Surely we fall between the devil and the deep blue sea? We must continue to show the truth - Thanks Bob - your analysis is great and the truth behind it is refreshing.
ReplyDeleteLike many a person who went to school in Birmingham, I still have my Oxford geometry set conserved in the Cadbury's tin that they gave you after the school factory visit. I have to be careful not to lapse into a lyrical version of Carl Chinn, at this point; but memories of the wonderful whiff of cocoa still sets my memory senses alight, even though captured on the top deck of a Woodbine-filled No 11 'bus passing the factory on the way to City Road.
ReplyDeleteKraft was always going to be a stitch-up for Bournville and the other sites. I guess the deal fell at the worst/best time: worst for Cadbury as a brand identity/marvellous for the fund managers who were looking for cash to recycle/superbly marvellous for the investment bankers – ship in the Bolly, and all that.
We have a government that prostrated itself on the altar of celebrity and the Queen's obedient servant ministers turning obedient tricks for the powerful to gainsay the lie that they actually had influence. So, what better could we expect than what has happened to Cadbury? A government that re-wrote the law to allow foreign investors to play freely with the UK's assets without a mind for reciprocity is the same government that allows the USA to extradite UK citizens for offences committed in the UK again without a thought of reciprocity is the same government that mislead this nation into war.
The theological reflection is on idolatry.