1. copyright : http://strategicorner.com
Kraft’s Acquisition over Cadbury: Cultural Root Issue
Taking a decision to take over Cadbury, Kraft initially aimed to grow a profitable
growth as a part of its long-term strategy. Kraft is going to broaden the range of products
as their expansion target. Before the take over, Kraft already had many big brands all
around the world; the purchase, at the end of the day, equipped Kraft a big strength on
chocolate area. This seemed really promising as Cadbury has market advantage
especially in India and Brazil (Wikipedia Kraft Foods, 2011).
Everything is good on paper. However, there is still an issue that waits to be
faced: cultural shock. The purchaser is a real American company which was created in
the modern industrial era of the country. Forty of its brands are at least a century old
(Wikipedia Kraft Foods, 2011). On the other hand, Cadbury is so British. Older than
Kraft, it was founded in 17th century in England with so many homeland tradition and
sense-of-ownership (Wikipedia Cadbury, 2011). These two things created a shock in
personality between the parties. Most important aspect inside the companies is also
affected: the workers.
Kraft’s History
Kraft was founded in 1903 which starting to use “Kraft” element in 1909 with
name J.L. Kraft and Bros. Company. The company at that time was a join James L. Kraft

2. with his other four brothers. The company used to sell cheese, until 1915 it invented a
break through of pasteurized processed cheese (Wikipedia Kraft Foods, 2011). This
patent gave many sales to Kraft.
The next phase of the company was starting in 1924 with a new name Kraft
Cheese Company. Kraft started to acquire many dairy companies to strengthen their
position in the market. Kraft bought ensured many sectors that have to do with cheese
was on their reach so that they could be more efficient. In 1927 Kraft started to broaden
the wings internationally. After that, through some strategic partnering, Kraft changed
name twice to Kraft-Phenix Cheese Company in 1928, Kraftco in 1969, Kraft, inc in
1976, and finally Kraft General Foods, Inc in 1989. In the latest year mentioned, Kraft
merged with Philip Morris's General Foods unit after Philip Morris Companies purchased
Kraft for $12.9 billion one year before.
Kraft owns long list of brands which some of them are very popular. Some of
successful brands are Jacobs, Maxwell House, Milka, Nabisco (Oreo), Oscar Mayer,
Philadelphia, Trident, and Tang. In chocolate bar, Kraft already has Toblerone brand
which was acquired in 1990 from Jacobs Suchard. Overall, Kraft divides its brands into
five main sectors: snacks (30.6% of its revenue), beverages (19%), cheese (18%), grocery
(16.6%), and convenient meals (15.8%) (Finding Universe Kraft Foods Inc Company
History, 2011).
Cultural root of Kraft could be tracked back from its history. There are some
unique characteristics of the company that can be seen clearly: Kraft is a company with
ability to participate to the society, but in same time a company still gaining benefit from
it. An experience from world war tells the story. In World War I, Kraft supplied cheese to

3. the US Army. Continued in World War II, Kraft helped to ease wartime shortages in
food. Postwar, their advantage in time of war benefited the company: formula of new
product development and advertising in wartime helped build the company later (Finding
Universe Kraft Foods Inc Company History, 2011). This was ensuring them to still own
their advantage in learning through hard time.
To adapt and to compete by vanishing their competitors are another traits which
Kraft owns. At the record, Kraft (and its embryo), at least, already made 13 acquisitions
and 7 strategic partnering movement just to ensure the position in the market (Finding
Universe Kraft Foods Inc Company History, 2011). All of these movement that Kraft had
made, show a convincing proof that Kraft is a company with great flexibility for
adaptation to any cultures and changes.
- 1916 : Kraft acquired Canadian Cheese company
- 1927 : Kraft acquired A.E. Wright
- 1928 : Kraft acquired Phenix Cheese
- 1928 : Kraft acquired Southern Dairies
- 1928 : Kraft acquired 10 "cheese dealers"
- 1928 : Kraft acquired Henard Mayonnaise Co
- 1929 : Kraft acquired D.J. Easton
- 1929 : Kraft acquired 2 mayonnaise companies
- 1929 : Kraft acquired 10 cheese companies
- 1929 : Kraft acquired International Wood Products
- 1929 : Kraft acquired Gelfand Manufacturing
- 1930 : Kraft is acquired by National Dairy Products (acquired)
- 1953 : General Foods (which later merged with Kraft) acquires Perkins Products
- 1980 : Kraft merges with Dart Industries
- 1981 : General Foods acquires Oscar Mayer & Co.
- 1985 : Philip Morris Companies Inc. acquires General Foods
- 1988 : Kraft is acquired by Phillip Morris
- 1989 : Phillip Morris combined Kraft with General Foods to form Kraft General Foods,
Inc.
- 1995 : Major restructuring melds Kraft and General Foods into Kraft Foods, Inc.
- 2000 : Philip Morris buys Nabisco Holdings for $18.9 billion and combined into Kraft

4. Now Kraft is very strong in the market. Around the globe, in 140 countries, it runs
117,000 employees. With 83.9% ownership of Phillip Morris Companies Inc., it achieves
$49.2 billion revenue in 2010 (Finding Universe Kraft Foods Inc Company History,
2011).
Cadbury’s History
Cadbury began in 1824 together with John Cadbury as a seller in Birmingham. It
is said that from the beginning of the business, Cadbury had a particular motivation.
Believing that alcohol was a main cause of poverty, John hoped his products of (coffee,
tea, drinking chocolate and cocoa) might serve as an alternative (Englishteastore Cadbury
History, 2011). Then John did ‘merger’ with his brother, Benjamin, and they formed
'Cadbury Brothers of Birmingham'; the company start to sell 11 kinds of cocoa and 16
kinds of drinking chocolate.
Taken over by sons, Cadbury grew and was trying to focus on chocolate (cocoa
essence) while stop selling tea. Cadbury manufactured its first milk chocolate in 1897. By
1899, their factory in Bournville employed 2,600 people and Cadbury was incorporated
as a limited company (Englishteastore Cadbury History, 2011).
In 1905, higher proportion milk in chocolate, called Dairy Milk chocolate, was
launched. By 1913, it became the company's best selling product. Fruit and Nut was
introduced as part of the Dairy Milk line in 1928, soon followed by Whole Nut in 1933
afterwards (Wikipedia Cadbury, 2011).

5. Being big food producer, Cadbury involved itself into World War I participation
supporting their country. Not only supplied food to soldiers, but also it sent more than
2,000 of Cadbury's male employees going to war. In the World War II, Cadbury also
helped the government by converting parts of its factory into workrooms to manufacture
war equipment (Englishteastore Cadbury History, 2011). Cadbury St. John’s Ambulance
unit helped people during air raids as well.
Back to business talk, Cadbury merged with drinks company Schweppes to form
Cadbury Schweppes in 1969 (Wikipedia Cadbury, 2011). Schweppes is a classic
beverage brands which was produced by Schweppes Company (established since 1783 in
Geneva). However in 2007, the company did demerger and split the business into two
units: main chocolate & confectionery market and US drinks business. The US drinks
business, since 2008, has been renamed as Dr Pepper Snapple Group Inc.
The Acquisition Decision: What is the effect?
In order to broaden the position global confectionery leader, especially strengthen
the power in emerging market, Kraft made bids to buy Cadbury. It is an obvious
influence of Kraft’s CEO, Irene Rosenfeld, long term strategy (Wowelle Irene Rosenfelds
Strategy is Packing More Nutrition into Kraft, 2010). Kraft £9.8bn initial takeover bid
was rejected by Cadbury on November 9, 2009. Several months later, on January 2010,
Kraft gave valuation at $19.5 billion (£11.5 billion). Cadbury approved the revised offer.
On the paper, the decision seems ideal. Brand wise, 186-old-years Cadbury is a
very strong and long presence brand in the chocolate industry – a good opportunity for

6. Kraft to develop. Apart from that, with sales of Cadbury growth of 20% and profits
growing at 30% in a competitive market, it is no surprise that one-quarter of Kraft’s $50
billion in sales is coming from emerging markets because of Cadbury. Another thing,
Kraft believed that it could take advantage of the strong Cadbury distribution in India,
Brazil and Mexico.
Sometimes the brightest blue-print also has slight deviation in the
implementation. A general truth is reflected from an analyst’s statement towards Kraft-
Cadbury acquisition: “it will take some time to make these businesses truly combine and
operate as one” (Steuber Kraft, Cadbury not such a sweet deal? 2010). Although Kraft
Q1 revenues soar by 26 percent after Cadbury acquisition (Foodnavigator Kraft Q1
Revenues Soar by 26 Percent after Cadbury Acquisition, 2010), it at the end of the day
failed to achieve the 2011 revenue target (Dailymail Kraft Exodus Cadbury Fears Grow,
2010). Kraft targeted revenue $50 billion in 2010, while Wall Street gave lower $48.27
(Steuber Kraft, Cadbury not such a sweet deal? 2010). Finally, Kraft passes the Wall
Street by achieving $49.2 billion but still fails to pass on its own target.
The biggest issue is on cultural shock especially among their employees. Numbers
of exodus were done by former workers. A total of 120 out of 170 managers and
executives have quit since Kraft took control of the 186-year-old company. Most of them
are ‘brain power’ of the company. They were coming from advertising, creative, design
and marketing specialists (Dailymail Kraft Exodus Cadbury Fears Grow, 2010). One of
the big losses is Mark Reckitt, who was Cadbury’s chief strategy officer and who is the
most senior executive left from the company within Kraft, is leaving in July. Tamara
Minick-Scokalo, a former Cadbury executive who currently heads Kraft’s European

7. chocolate business and Ignasi Ricou, who ran Cadbury’s gum and sweet operation in
Europe, are also leaving the company (Marketing Magazine Two Senior Cadbury
Executives, 2011). Overall, 6 out of 17 seniors’ position in Cadbury have left the
company since the acquisition (FT.com Kraft Hit by Exodus of Cadbury Executives,
2010).
Another reaction was nationalism sentiment. People (and consumers) in UK are
feeling hard to accept the-so-British-company was sold to other people. Some felt such a
humiliation to be bought by other country. Many of them sounded a boycott for Cadbury
under Kraft through street demonstration or cyber social networks. The effect is also
taken place among consumers.
The main problem is emphasized in culture. Both companies are coming from
different root which have different perspective and condition. How they compete and
how they retain consumers are not the same. From the Cadbury workers, Kraft feels so
stiff and bureaucratic. The number of layers and amount of people that have to be
involved to make a decision are many. Beside there is opinion, the CEO, Irene Rosenfeld
acts authoritarian (FT.com People Still Chewing on Kraft Culture, 2011).

8. Theoretical Cultural Comparison & Acculturation Frameworks
A comprehensive summary of both companies combined culture is needed in
order to understand their behavior. Goffee and Jones through their paper explain the
description of a culture. To elaborate what is the culture of Kraft and Cadbury, four
relevant variables of them will be used. Those variables are: networked, mercenary,
fragmented, and communal. Networked is about how the people inside the company
treated. A friendly feel among workers is the indicator. On the other hand, mercenary has
further function; mercenary measures how far the purpose of the relationship.
Both fragmented and communal say a contrast symptoms. Fragmented talks a lot
about individualism- how individual right is recognized. While, communal much talks
about social and communalism of work atmosphere. So, sixteen variables are derived
from those four variables.
Cultures Variables Characteristic Kraft Cadbury
Networked - Flexibility 
- Participation 
- Informal Approach 
Mercenary - Idealistic 
- Destroying competition 
- Hardwork  
- Material reward 
Fragmented - Support individual creativity  
- Individual environment 
- Preserve different culture 
Communal - Teamwork  
- Loyalty 
- Friendship 

- Community value 
- Family atmosphere

9. Can be summarized that Kraft and Cadbury are in opposite way each other in terms of
character:
1) Kraft people values more multi-culturism, while Cadbury prefer the more
exclusive British heritage. It is aligned consistently with what Kraft or Cadbury
has done along the history.
2) Kraft is fine to destroy its competition by acquiring them; it would force Kraft
to accept many different cultures. In contrast, Cadbury was not familiar with such
approach to compete; therefore Cadbury was still relatively unchanged.
3) In terms of social atmosphere, Cadbury is more family-feel than Kraft. One
another thing is flexibility to work in the company.
4) Kraft is far more bureaucratic than Cadbury.
Based on all elaboration so far, to be strict, separation model is the best model to
adopt for Kraft-Cadbury acculturation. A framework titled Acculturation in Mergers and
Acquisitions (1988) defined separation as a mode of acculturation involves attempting to
preserve one's culture and practices by remaining separate and independent from the
dominant group. Thus, if the mode applied, there will be minimal cultural exchange
between Kraft and Cadbury. Each function is independent.

10. The conclusion to apply separation mode is coming from the characteristics of the
companies involved. From the perspective of acquired company, which is Cadbury,
people inside want to preserve their own culture and them also perceive Kraft as
outsider-buyer. So, separation is theoretically chosen.

11. References
DailyMail, 2010. Kraft Exodus Cadbury Fears Grow. Available at:
<http://www.dailymail.co.uk/news/article-1297380/Exodus-Cadbury-fears-grow-march-
Milka.html#ixzz1Xsdhm3EJ >. [Accessed September 14, 2011].
Englishteastore, 2011. Cadbury History. Available at: <http://www.englishteastore.com/
Cadbury-history.html>. [Accessed September 14, 2011].
Finding Universe, 2011. Kraft Foods Inc Company History. Available at:
<https://www.fundinguniverse.com/company-histories/Kraft-Foods-Inc-Company-
History.html >. [Accessed September 13, 2011].
Foodnavigator, 2010. Kraft Q1 Revenues Soar by 26 Percent after Cadbury Aacquisition.
Available at: <http:// www.foodnavigator-usa.com/Business/Kraft-Q1-revenues-soar-
by-26-percent-after-Cadbury-acquisition >. [Accessed September 14, 2011].
FT.com, 2010. Kraft Hit by Exodus of Cadbury Executives. Available at:
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5b2be8-9c6b-11de-ab58-00144feabdc0.html#axzz1XscKPtz7>. [Accessed September 15,
2011].
FT.com, 2010. People Still Chewing on Kraft Culture. Available at:
<http://www.ft.com/intl/cms/s/0/71a34530-2019-11e0-
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Higgs and McGuire, 2001. Emotional INtelligence and Culture: an Exploration of the
Relationship Between Individual Emotional Intelligence and Organisational Culture.
Henley Management College, Greenland.
MarketingMagazine, 2010. Two Senior Cadbury Executives . Available at:
<http://www.marketingmagazine.co.uk/news/1035077/Two-senior-Cadbury-executives-
leave-Kraft/ >. [Accessed September 14, 2011].
Nahavandi and Malekzadeh, 1988. Acculturation in Mergers and Acquisitions. The
Academic of Management Review.
Steuber, Erin, 2011. Kraft, Cadbury not such a sweet deal? Available at:
<http://news.medill.northwestern.edu/chicago/news.aspx?id=163092>. [Accessed
September 14, 2011].

12. Wikipedia, 2011. Kraft foods. Available at: <http://en.wikipedia.org/wiki/Kraft_Foods>.
[Accessed September 14, 2011].
Wikipedia, 2011. Kraft foods. Available at: <http://en.wikipedia.org/wiki/Cadbury>.
[Accessed September 15, 2011].
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<http://www.wikinvest.com/stock/Kraft_Foods_(KFT)/Data/Income_Statement#Income_
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Wowelle.com, 2010. Irene Rosenfelds Strategy is Packing More Nutrition into Kraft.
Available at: <http://wowelle.com/2010/08/18/irene-rosenfelds-strategy-is-packing-more-
nutrition-into-kraft/>. [Accessed September 15, 2011].