The nearly $20 billion Kraft-Cadbury merger, despite months of bickering and the intrusion of other potential suitors, is finally a go.
Now comes the fun part. Will the brands blend like milk and chocolate, or like Velveeta and Creme Eggs? After all, Cadbury chairman Roger Carr spent most of the last four months hurling barbs at Kraft management, declaring just last week that there was "no strategic, operational, managerial, or financial reason" to execute the acquisition. But Carr’s post-deal comments imply that his aggressive stance was all in the best interests of his brand and the brand’s shareholders.
Posturing aside, expect the marriage to get off to a rocky start. Layoffs are inevitable, and in one British town, home to a Cadbury factory since 1879, workers are calling the deal “the end of a great British company.”
Now that Kraft has easy entry into Cadbury’s established non-US markets, it must ensure that its brands are properly introduced to new – and culturally different – audiences. The Wall Street Journal reminded us of Kraft’s difficulties launching the Oreo in the UK. (For starters, we Yanks call it a “cookie,” while across the pond it’s a “biscuit.”) Similarly, Oreo's success in China only followed after Kraft allowed for a reduction in its sugar content. Will other Kraft brands need to be reformulated for new markets as well? A darker green for lime Jell-O, more “whiz” in Cheez Whiz – prior to export?
One of those markets Kraft covets, according to one Cadbury executive, is India. Chocolate and confectionary consumption is relatively low per capita, but Indians currently snack on Cadbury sweets more often than those of other brands. Gaining an early foothold in a populous nation is also what motivated Heineken to forge a settlement to sell its beer there.
The growing pains of a combined brand portfolio will produce plenty of news and perhaps some intriguing surprises in the coming months, especially if Mars, now supplanted as the world’s biggest confectioner, plans to react.
And who knows? Maybe this Easter we’ll be sold on that Velveeta Creme Egg after all.