Blog: Dean BestWhen business is like a trip to the dentist

Dean Best | 8 February 2010

"I would liken it to a root canal."

Kraft Foods boss Irene Rosenfeld clearly did not enjoy her meeting with Peter Mandelson last week. The UK Business Secretary asked to meet Rosenfeld in a bid to extract assurances over UK jobs after the US food giant sealed its takeover of Cadbury.

As you'd expect, Rosenfeld gave no such assurances - why should she? - although when she addressed Cadbury staff later in the week, she did publicly admit for the first time that jobs would be lost as Kraft absorbs the Dairy Milk maker.

With hundreds of millions of dollars in synergies to pursue, the prospect of redundancies comes as little surprise. Rosenfeld tried to rally the troops by setting her sights firmly on the "knuckleheads" at her nearest competitor - and dubbing 2010 the year of "BMW" - Beat Mars Wrigley.

The big question (and, while we're here, a big thanks to all those who took part in our survey on the Kradbury deal) will be whether Kraft's pursuit of synergies means cuts to brand-building, sales and marketing - key elements in the company's bid to fend off Mars and Wrigley and remain the world's largest confectioner.

Food makers the world over sometimes likely compare meeting their retail customers to a trip to the dentist. In the UK last week, a new code designed to govern relations between suppliers and retailers went live - and some on both sides were not happy.

While the boss of frozen food retail specialist Iceland labelled the code a "complete waste of time", the head of the National Farmers Union claimed grocers had used the run-up to the dawn of the new code to pursue "bully-boy tactics".

In the days leading up to the introduction of the code, NFU president Peter Kendall said he had heard claims of retrospective payments and changes to trading terms that all added up to some of the most "unreasonable demands" he had seen. The possible launch of an ombudsman to oversee the code will be just as controversial.

One of 2009's most public supplier-retailer spats was between Unilever and Belgium-based retail giant Delhaize. After a row over pricing led to hundreds of Unilever products being delisted, the two sides called a truce and Delhaize reinstated the company's brands. All's well that ends well?

Unfortunately for Unilever, the Delhaize delisting was the least of its problems in Western Europe in 2009. Volumes in the region slipped and margins fell, with Unilever attempting to boost sales through higher marketing investment.

Of course, certain markets in Western Europe have been hit hard by the recession but some industry watchers were disappointed that Unilever's marketing spending had seemingly failed to pay off. Unilever chief Paul Polman himself admitted the company has a "long way to go" in the region when he published the group's annual results on Thursday.

Analysts gave Polman a resounding thumbs-up for his first year in charge but revitalising the Flora-to-Knorr maker's business in Western Europe will be key to whether the Dutchman's second year is seen as a success.


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