Blog: Dean BestUK politicians issue another verdict on Kraft and Cadbury

Dean Best | 23 May 2011

The reaction to today's (23 May) publication of another UK parliamentary report into Kraft Foods' acquisition of Cadbury suggested that the US food giant had got something of a kicking - again.

'MPs condemn Kraft over boss's snub to parliament' said The Guardian in the UK. 'UK lawmakers criticize Kraft's Cadbury deal' said the Associated Press newswire in the US.

Kraft's takeover of Cadbury was hardly the most popular of deals and the US group has already been the subject of fierce criticism in UK political circles.

In March last year, the House of Commons' Business, Innovation and Skills select committee grilled Kraft executives over its plans for Cadbury and why it was unable to keep the confectioner's Somerdale plant open despite earlier suggestions - when the company first went public with its interest in the Dairy Milk maker - that it would reverse the UK firm's 2007 decision to close the factory.

Back then, Kraft chairman and CEO Irene Rosenfeld was also criticised for not appearing before the committee, with one member describing her absence as a "sizeable discourtesy".

A committee report, published a month later, said Kraft had acted "irresponsibly and unwisely" after suggesting it could keep the Somerdale facility open. Kraft's conduct, the report claimed, had "damaged its UK reputation and soured its relationship with Cadbury employees".

The acquisition of Cadbury had further ramifications. In October, the UK's Takeover Panel put forward plans for tougher rules for bidding companies and greater protection for employees - proposals borne out of the political criticism of Kraft's takeover of Cadbury. Consultation on the proposals ends this week.

Today's report was made in the wake of a second committee hearing into the deal, a hearing that took place in March. In the new report, the committee - again - did criticise Kraft.

It revealed that Parliament still had "significant concerns" over the company's acquisition of Cadbury, including the report's claim that "strategic decisions on brands" are now being made in Zurich, where Kraft has its head office.

The report also hit out at Rosenfeld's refusal to appear before the committee on two occasions and claimed that Kraft's failure to put her forward for questioning "steered close to a contempt of the House".

For all that, there was some praise for Kraft. The report said the company was "committed to investment in Cadbury".

The report said: "We were especially encouraged by continued investment in [Cadbury's former HQ] Bournville and recruitment into research. Given the particular responsibility Kraft has to Cadbury employees following the Somerdale episode, we trust that this approach to investment will continue. It would also assist considerably in rehabilitating Kraft's reputation if the savings planned from integration synergies were used to support further investment for growth and accommodate the results of that growth in terms of recruitment needs."

Nevertheless, the committee indicated it would continue to monitor Kraft's commitment to Cadbury closely.

"Our overall conclusion is that, while there remain some significant concerns about Kraft takeover of Cadbury, a number of positive signs may be beginning to emerge. Those positive messages would have been considerably more convincing if conveyed directly to bodies such as ourselves from the top of the organisation. As for the future, Kraft's witnesses asked us to judge Kraft on its deeds. We shall."


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