Unlocking the Door: How Cadbury Acquisition Increased Kraft’s Global Footprint

October 24th, 2012
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CA2_136x136_DairyMilkKraft’s purchase
of Cadbury entrenched the company not just in Western Europe, but in key
emerging markets around the globe.

When Kraft Foods
purchased Cadbury in 2010
, many questioned the US$19.6 billion price tag for
the United Kingdom based company, feeling it was an unnecessary move to secure
a foothold in Cadbury’s key Western Europe markets. But the key component in
this deal was not increased penetration and brand recognition in already mature
markets – instead, it was to leverage the Cadbury name and distribution
networks across multiple developing markets – footholds not just to expand
already existing Cadbury share, but leverage those networks to bring on board
Kraft’s already diverse portfolio.

Euromonitor Datagraphic

Euromonitor International

Hot drinks can open the door for powder

While the
Cadbury deal made Kraft (soon to be Mondelez) one of the world’s largest
confection and packaged foods companies
, both companies boast a strong hold in
the beverage market as well. Cadbury’s Bournvita and Drinking Chocolate
represent strong global brands in the flavoured powder drinks category – drinks
that are key alternatives to coffee or tea for many consumers. Likewise, Kraft
has a long history of success amongst powder concentrates in soft drinks, with
Tang being the global leader. However, despite the success with powder
concentrates, Kraft had been unable to penetrate certain developing markets,
specifically India where distribution is often a key to success.

As the graphic
below illustrates, however, Kraft’s acquisition placed them as category leaders
for powdered hot drinks in several key developing markets. Specifically in
India, the company acquired a brand already on the rise amongst hot drinks. By
going from a relatively underrepresented global brand name to an established
brand, Kraft can leverage existing distribution and retail relationships to
bring its own products to the shelves.

Nigerian Growth Euromonitor

Euromonitor International

Given the
seasonality of flavoured powder hot drinks and powder soft drink concentrates,
Kraft is now in a position to grow its Tang, Kool-Aid, and Crystal Light
brands in markets where Cadbury Bournvita and Drinking Chocolate are already
well established. This could be of particular interest in Nigeria where sales
of flavoured powder hot drinks continues to rise due to consumers using the
drinks as both hot and cold beverages. Kraft can leverage this trend to not
only promote Bournvita, but also introduce Tang, Kool-Aid, and other powder
concentrates into a market currently lacking Kraft products.

Due to the
retail landscape of many developing markets
, as well as a lack of on the ground
expertise in those markets, Kraft is starting to show the true intent behind
the Cadbury deal. Now, as the company moves forward in securing those
relationships, it has begun to reap the benefits, not just in profits from
their newly acquired brands, but in cross promoting those brands with its own



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