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Cadbury vs. Kraft: Would a takeover be better for sustainability?

I’ve just been out to dinner with a friend of mine who has worked in this field of sustainability for over a decade.

Over dinner, we had a good discussion about Cadbury and Kraft.

As all readers will know, Kraft, accused of being a “low growth conglomerate” is currently going hostile in its takeover bid of Cadbury, seen in the UK as a venerable ethical instutition, particularly given its recent conversion to buying large volumes of fair trade cocoa for its chocolate.

My friend, who shall remain nameless, made some interesting points. Namely, that:

1) Because Kraft is American, and seen as a ‘low quality cheese company’ here in the UK, the media and commentators are getting all nostalgic about the loss of what is being pitched as a UK company. Cadbury, a major multi-national company, is being presented as a national institution that should remain ‘British’. But the company is a huge multi-national, and should be seen as such.

2) Many of those who decry the sale of the firm to Kraft by shareholders were those who decried the sale of Green & Black’s, the ethical chocolate company, to Cadbury a few years ago. The line of ‘smaller ethical company sells to big MNC’ is now being applied by some people to the very company they called the ‘big MNC’ a couple of years ago. In short, hypocrisy.

3) More importantly, he asserted, Kraft has been into sustainable sourcing (with the Rainforest Alliance) for years, whereas Cadbury’s conversion to fair trade is relatively recent in a meaningful sense (i.e. volume).

4) Lastly, that Kraft takes sustainability very seriously itself, and the joining of the two would create one of the largest, if not the largest, food companies in the world, offering some competition to Nestle, a laggard. And, that such a takeover would present to the world (and NGOs) a company that utilises both Rainforest Alliance and Fairtrade certification, providing lessons in both standards diversification (one standard not being the answer to all issues) to other companies, And leading the market.

He pointed out that the commitment of Mars, a giant US company, to sustainable cocoa sourcing recently, is much greater in terms of volume than Cadbury is capable of.

So overall, he argued, a giant food company going seriously sustainable, (in significant part) would be a good thing all round. Or at least, Kraft’s takeover of Cadbury would not be as ‘bad’ for ethical business, as many UK commentators are suggesting.

He made a compelling case.

My beef with his argument is one of diversity. Much as I like Kraft, (Here’s a podcast I did with the MD of UK and Ireland two years ago) for the moves they have made on sustainability, I also like choice.

As a Briton, I’ve seen what the rise of the big supermarkets, particularly Tesco, can and has done, albeit accidentally, to smaller businesses in their vicinity. My friend and I both agreed on this concern.

Despite the opportunity for giant companies to drive sustainability into their supply chains and lead their customers (Wal-Mart deserves some credit here, along with particularly Marks and Spencer and Sainsbury’s, and in part, Tesco) along the path, competition must also be valued, I suggested.

My friend agreed. And there we left it.

Despite the Pinot Noir, the debate was unresolved, as it is so often in the complex, contradictory world of sustainability and business.

It’s all about trade-offs, and the trade off between corporate size and market diversity is still in its infancy.

Look at the banks post crisis, for example.

Oligopolies, their power, benefits and impacts, are a debate which has barely begun.

Let us hope in sectors outside finance, that we can learn to handle it a bit better than our governments have in the banking sector so far.

2 Comments

  1. Hi Toby
    Well, I didn't oppose the Cadbury takeover of Green & Blacks, so I escape that charge I guess. But I am against the takeover here. I do think Cadbury has a corporate culture committed to responsible practice that goes back to its history and founding family. Having worked with Todd Stitzer briefly on the marketplace leadership team at Business in the Community before I left there, I do think the team there has real integrity.
    Of course, that doesn't mean that Kraft is a bad company, and it's great that it's doing a number of things as well. We're not talking a scenario that says that rapacious greed is going to wipe out every spark of decency at Cadbury.
    What's the value of a corporate culture? In Friedman-land, nothing at all. But we don't live there any longer.
    I don't think it will be a disaster if Kraft is successful – but I remain hopeful that the current team at Cadbury will fend them off.

  2. Diversity is what makes up the fabric of the market, of society and the way we think. We want choice and it doesn't take long of having a tesco's round your corner to get bored of what they offer. The inspiration offered by choice is that we connect with having options.

    I am not siding with Cadbury's or Kraft, I'm just saying that with so many chocolate appreciators out there, surely there is a way to maximise the choices without everything weighing on advertising budgets. Lets keep the market open and if Kraft go cold, hope that they reinstate what makes them particular and why we should choose their offer over Dairy Milk.

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