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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