IIPM's a unique Global Opportunity and Threat Analysis (GOTA) Program: Why Mad. Avenue loves sweet deals?

Thursday, March 04, 2010

Why Mad. Avenue loves sweet deals?

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Will the ad world soon be mourning the death of brand Cadbury? Or perhaps Irene has a more ‘Krafty’ plan...

In a bid to create a “global powerhouse in snacks, confectionery & quick meals,” Kraft Foods CEO Irene Rosenfeld has laid siege to one of the crown jewels of corporate Britain. Irene’s bold move to acquire Cadbury for $16.7 billion has shaken other confectioners like Nestlé & Hershey out of sweet reverie. After all, if Irene (who is sixth on the 2009 Forbes list of most powerful women) pulls off this coup, Kraft will become number one in the global confectionery market, creating a $51 billion company and its market share would touch a cool 14.9%, toppling the apple cart of Mars, which currently rules the market with a 14.5% share.

The advertising world too has been shaken out of its reverie. Even though the deal is far from done, Madison Avenue is already salivating at the prospect of the $2.7 billion advertising monster that the acquisition is likely to create. As per Ad Age, in case of a marriage, in the US alone, the merged entity would together spend close to $1.5 billion in marketing (See table for details).

With Mars’ acquisition of Wrigley last year, further consolidation in the industry was expected. And Cadbury being the second largest confectioner, it was perhaps ripe for the picking. Irene has said that Kraft is “eager to build upon Cadbury’s iconic brands & strong British heritage.” Irene’s altruistic vision notwithstanding, as it happens more often than not in such cases, the acquired brand gets absorbed into the host brand. In this case that will mean the end of Cadbury as we know it. Says Rob Frankel, Branding Expert “Chances are that Cadbury’s entire history and brand value will slide into oblivion, as Kraft absorbs it.” We have our fingers crossed. Do you?

Vareen Ray

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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