Final Interim Cadbury

8/8/2019 Final Interim Cadbury

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KRAFT FOODS TAKEOVER OF CADBURY:REPERCUSSIONS on cadbury INDIA

By:

PREETI SINHA(49)

SHWETACHAWLA (65)

SOMNATH

http://www.powerpointstyles.com/








Kraft Foods Inc.

Was formed on December 10, 1923Headquartered in the United StatesAcross the globe in more than 155countries.Execute on a roll up strategy Largest confectioneries, food, andBeverage corporation






Beginning

Started with wholesale and door to door salesCirculars and advertisements in newspapers1924, the company changed its name to Kraft

Cheese Company and listed on the Chicago Stock

Exchange1926, it was listed on the NYSE M&A Stories

Dart merger Acquisition and merger with

General Foods






Kraft Foods brands

Nabisco and other snacks

Arrowroot · Barnum's Animals · Better Cheddars · Cheese Nips · Cameo · Chips Ahoy! · Claussen · Club Social · Corn Nuts · Fig Newton · Filipinos · Fudgee-O · Ginger Snaps · Handi-Snacks · Honey Maid · In a Biskit · Jell-O · LU · Lorna Doone · Mallomars · Nilla · Nutter Butter · Oreo · Peek Freans · Planters · Premium Crackers · Ritz Crackers · SnackWells · Sociables · Social Tea · Stoned Wheat Thins · Teddy Grahams · Triscuit · Vegetable Thins · Wheatsworth · Wheat Thins

Cadbury

Bassett's · Boost · Bournville · Bournvita · Brunch Bar · Buttons · Caramilk · Chomp · Clusters · Creme Egg1 · Crunchie · Curly Wurly · Dairy Milk (Caramel)1 · Double Decker · Dream · Fingers · Flake · Freddo · Fry's · Fudge · Green & Black's · Heroes · Kent · Kréma · Koko · La Pie quiChante · Maynards · Milk Tray · Mini Eggs · Moro · Mr. Big · Old Gold · Pascall · Picnic · Poulain · Roses · Shots · Snack · Star Bar · The Natural Confectionery Company · Time Out ·

Trebor · Turkish Delight · Twirl · Vichy Pastilles · Wispa






Cadbury Adams and other gumBubbaloo · Bubblicious · Certs · Chiclets · Clorets · Dentyne · Halls · Hollywood · Malabar · Stimorol ·Stride · Sour Patch Kids · Swedish Fish · TridentOther confectionery

Alpen Gold · Baker's Chocolate · Côte d'Or · Daim · Freia · Jet-Puffed · Kvikk Lunsj · Lacta · Marabou ·Milka · Prince Polo · Terry's · Toblerone · TrakinasCondiments

A1 Steak Sauce · Bonox · Bull's-Eye Barbecue Sauce · Grey Poupon · Kraft Mayo · Miracle Whip ·

VegemiteCoffee

and other beveragesCafé HAG · Capri Sun · Carte Noire · Country Time · Crystal Light · General Foods International ·Gevalia · Grand'Mère · Jacobs · Kenco · Kool-Aid · Maxwell House · Nabob · Onko · Sanka · Tang ·Tassimo · YubanCheese and dairy products

Athenos · Breakstone's · Cheez Whiz · Cool Whip · Cracker Barrel · Dairylea · Deluxe · Easy Cheese ·Knudsen · Light n’ Lively · Philadelphia · Polly-O · Singles · Velveeta






DISTRIBUTION OF CADBURY… WILL IT HELP

KRAFT!!

Kraft Foods Inc is set to become the top chocolate andconfectionery maker Primarily focus to be a confection and snacks orientedbusiness with its presence over 160 countriesRequired a supply chain innovation-. A supply chain thatcaters to consumers who are impulse buyers and those whowant grocery and dairy products.New product introduction in line of confectionaries can be

leveraged on Cadbury’s distribution network






Benefits

Combination of these two Make themTOP PLAYER in chocolate andconfectionary industryBoth work On SAP- IT systemIntegration

ChallengesInventory Level ManagementLogistics And TransportationPrice hikes of sugar and

replacement of many productsSenior management to bringoperational excellence andStandardizationSupply chain that caters toconsumers motivated by impulse

buying is different than one thatserves grocery and dairy.







FINANCIAL MANAGEMENT

REASONS FOR TAKEOVER- FINANCIAL FRONTAccess to emerging economiesCadbury’s as a company was performing reasonably well with P/E ratio almostdouble of Kraft at 27.04 {which is much larger than that of Kraft’s biggestcompetitor and the leading market player Hershey (P/E=18.80)}.

A HAWK EYE VIEW OF CADBURY INDIA

Contributed about 22% of Cadbury Asia Operations in 2009.Increased per capita consumption of cadbury products led by consumption of dairy milk shots and eclairs.






Current Ratio

• The ratio is mainly used to measure the company's ability to pay back itscurrent liabilities (such as trade payables and short-term overdrafts) with its

current assets (such as cash, inventories, and trade-receivables).• Industry average- 1.3:1

• Cadbury is changing its way to access financing. Thus a slightly lower valueof current ratio is not a danger sign as far as financial stability is concerned.

Interest Coverage Ratio

• The ratio reflects the financial state of the company to be sound and that thecompany is not burdened under its debt obligations.

Time 2005 2006 2007 2008 2009

ICR 48.73 77.60 106.72 39.80 136.88

Time 2005 2006 2007 2008 2009

CR 0.85 0.61 0.61 1.12 1.04






Debt/equity ratio

• For Cadbury India the ratio had been very low and the figures stand at 2%for 2009.

• Thus it reflects the Company’s ability and willingness to finance its growth

with the help of earnings generated within the business rather than going for any external debt.

Return on net worth

• Reveals how well the resources of the firm are being used.

• It is used for measuring the overall efficiency of a firm.

Time 2005 2006 2007 2008 2009

Debt/equity

0.02 0.03 0.02 0.09 0.02

Time 2005 2006 2007 2008 2009

RONW 10.59 17.55 28.96 35.69 35.53






Return on capital employed

• It’s a measure of company’s profitability

• The primary objective of business is to earn profit, higher the return oncapital employed, the more efficient the firm is in using its funds.

Operating profit Margin

• A company's operating income figure is often the preferred metric (deemedto be more reliable) of investment analysts, versus its net income figure, for making inter-company comparisons and financial projections.

• Acquisition may lead to standardization of processes and reduction in coststhus giving the ratio a more healthy shape.

Year 2005 2006 2007 2008 2009

ROCE 18.74 29.68 38.44 40.91 43.48

Year 2005 2006 2007 2008 2009

OPM 11.25 13.16 13.27 13.75 13.81






Gross Profit Margin

• Used to analyze how efficiently a company is using its raw materials, labour and manufacturing-related fixed assets to generate profits.

Asset Turnover Ratio• This ratio is useful to determine the amount of sales that are generated fromeach dollar of assets. Companies with low profit margins tend to have highasset turnover.

• The ratio is useful for growth companies to check if in fact they are growing

revenue in proportion to sales.

Year 2005 2006 2007 2008 2009

GPM 12.83 14.11 10.62 11.45 11.54

Year 2005 2006 2007 2008 2009

ATR 2.22 2.49 2.4 2.71 2.67






Inventory turnover ratio

• Inventory turnover ratio measures the velocity of conversion of stock intosales.

• indicates efficient management of inventory.

• Inventory turnover ratio is also an index of profitability, where a high ratiosignifies more profit, a low ratio signifies low profit.

• Decline in 2008 which was due to a decline in demand.

Earnings per share

• The earnings per share is a good measure of profitability and whencompared with EPS of similar companies, it gives a view of the comparativeearnings or earnings power of the firm.

• There is a huge growth in the EPS value for 2009 and a steady growthotherwise.

• Growth in 2009 due to reduction in the number of issued shares from 321.83lakhs to about 31.07 lakhs.

Year 2005 2006 2007 2008 2009

ITR 8.77 8.78 11.04 7.86 10.23

Year 2005 2006 2007 2008 2009

EPS 12.87 20.03 35.43 51.51 607.15







CONCLUSION- the language of numbers.

• Cadbury is a relatively healthy, steady company which has great prospects dueto its geographically diversified sales.

• Combined operations have the potential to create a £30 billion company inannual sales according to worldwide presence and the largest distributionsystem.

• The company will definitely be able to create synergy from its acquisition in Indiaspecially looking at the performance of Cadbury India, its goodwill and theinfrastructure created in terms of distribution system.

• The acquisition will lead to creation of operational synergy which will lead tosignificant cost savings thus creating synergies on the financial front.

• The acquisition would definitely pay off for Kraft although the company may facecertain financial complications in the immediate short term due to debt burden.






Success factors of Cadbury in

India

• A right product mix, right promotion strategy andreaching right target customer

• Pricing has been a key for success,• Economical distribution of the products






Marketing strategy of Cadbury

• Apt product portfolio according to Indianconsumer - Cadbury’s offer wide array of products from chocolate bars, to gum, candy ,

logiens, health drinks, snacks etc.• Identified right price level for each segment-

Cadbury’s has launched various products whichcater to customer segments with different price

expectation.






• Innovative advertisements-Cadbury in Indiahave always tried to touch the roots of Indiantradition

• Very strong and diverse positioning for all itsproducts so as to have a better connect with theconsumers and ease the decision makingprocess.






Kraft Foods

• Kraft Foods is a global snacks powerhouse with anunrivaled portfolio of brands people love.

• The company is the world's second largest food company

• Its portfolio includes 11 iconic brands with revenues

exceeding $1 billion – Oreo, Nabisco and LU biscuits;Milka and Cadbury chocolates; Trident gum; Jacobs andMaxwell House coffees; Philadelphia cream cheeses;Kraft cheeses, dinners and dressings; and Oscar Mayer meats. Approximately 70 brands generate annualrevenues of more than $100 million.






Kraft marketing strategy

• The company explores opportunities touse its broad portfolio to meet thedemands of specific consumer groups for

weight management, health and wellness,and other benefits.

• Internationally, the company focuses ongrowing and building profitable scale byexpanding its distribution reach incountries with rapidly growing demand.






• The basic strategy is to strike a better balance betweenglobalization and centralization.

• Four key strategies of Kraft that are to rewire its organizationfor growth, make its categories more relevant to consumers,exploit its sales capabilities and drive down costs.

• Kraft gives foremost importance to consumer’s point of view

• Use a rigorous process of market intelligence for collectionand analysis of data.

•Develop individual brand plans which are shared with Kraftkitchens to develop nationaly customized recipes.






Conclusion: Marketing Front

• Kraft Foods' acquisition of Cadbury would enable the USfoods major to return to the Indian market seven yearsafter its exit.

• Both the companies pay lot of attention to customer prospective and their traditional practices thus Kraftwould be mostly try to work on the roads that Cadburylaid out in India.

• Kraft will have selective integration of its product in toCadbury portfolio.






HR MANAGEMENT

Analysis of the problems which may arise for

KRAFT :

Variation in salary

Cross cultural Problems

Difference in opinion of employees in both the organizationsTraining and Development

Layoffs

Organization Structure






Description of how KRAFT may sort out

the problems

Cultural Integration

Organization Structure

Training and Development

Compensation and Benefits

Layoffs






Conclusion: THE GROUPS TAKE ON

THE HR FRONT Political factors that may affect the launch of the dairy milk

chocolates are health and safety laws, employment laws of different countries where Kraft group operates.

Socio-cultural factors that may affect include life styles of

people, health and fitness awareness and perception, differentcultures, spending patterns, aging populations.

Economic factors that may affect it are interest and inflationrates as it might affect production, world economic growth and

recession might also effect it.



Final Interim Cadbury

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