Cadbury #2

Kraft had to seek funding to allow it to put in an acceptable bid for Cadbury – that is, a bid so huge that Cadbury shareholders will find it almost impossible to reject when they meet to discuss it. Some of the shareholders are expressing doubts and fears but will have to abide by the majority decision. It is safe to assume that it is a done deal.

Banks will not always lend money if the risk is considered too great. However, the Royal Bank of Scotland (RBS) has no such qualms. It has lent the money to Kraft. About a year ago RBS had to be bailed out by the British government because it was in danger of collapsing. Now, secure once more thanks to the British taxpayer it feels confident that it can conduct business effectively, efficiently and profitably. (Who will profit is a moot point.)

So the situation is this: RBS, shored up by British taxpayers, has lent money to the American company Kraft so that it may buy the British company Cadbury. The banker/s who secured the deal will undoubtedly receive a very handsome bonus no matter what happens subsequently to Kraft/Cadbury. Am I the only one who finds this very odd?

Cadbury

So it has been decided. Kraft is to take over Cadbury. Does this make sense?

Cadbury was founded in 1824 in Birmingham by John Cadbury, a Quaker who sold tea, coffee and cocoa as alternatives to alcohol. Later he formed a partnership with his brother Benjamin. Chocolate was very expensive at that time but thirty years later import tax on cocoa was reduced, thus making it more affordable for more people.

By 1873 Cadbury chocolate products were so popular and profitable that the brothers decided to stop trading in tea and concentrate solely on chocolate.

John Cadbury retired in 1861 and the business was taken over by his sons Richard and George who bought the 14½ acres of the Bournbrook estate in 1878, renamed it Bournville and opened a factory there. In 1893, George Cadbury bought another 120 acres close to the factory and designed a model village to 'alleviate the evils of modern more cramped living conditions.' Eventually the estate covered 330 acres with 313 cottages to house the Cadbury employees. Further houses were built later on in the 20^th century. All the properties were notable for their modern interiors and large gardens which enabled residents to grow much of their own food. The philanthropic Cadburys believed that their workforce should be encouraged to be healthy and fit and incorporated free sporting facilities and later medical and dental care. No public houses (inns) have ever been built in Bournville.

My parents and I are 5th, 6th and 7th from the right  in the front row. It was my 20th birthday nine days later.
In 1964 my parents and I travelled by specially commissioned train to Bournville. My parents were successful small-business owners and had a large order book with Cadbury and had been invited to spend a day at Bournville with other business people from south-east England. We toured the factory and had a group photograph taken. My parents were directed to sit in the front row, as they were considered to be significant customers of the company.
My major recollection of the trip is of the smell. It was overwhelming and very sickly. The employees wore protective clothing, including gloves, but even so finger-marks could be discerned on some of the items. For a short while I didn't want to eat chocolate and although this phase didn't last (unfortunately) thereafter during many months that followed I inspected every piece of chocolate before it went into my mouth. I'm sure every process is completely automated now.

Astonishingly the sale of Cadbury to Kraft for £11.5 billion has been the second biggest news story this week in Great Britain. We have little left to sell. We are Little Britain – no longer Great because of the unique loss of our engineering, technology and other national assets to overseas interests. In effect we have become economic satellites to other countries. We were in the forefront of so many industries and technologies but they have been sold, asset-stripped. The only significant growth has been in banking and government employment, both with enormous liabilities now and in the long term.

Over the past few decades my husband has travelled the globe on business and learned that many nations could not understand why we in the UK seemed only too willing virtually to give away our national industrial and scientific treasures to the rest of the world. A sure sign of our failure to address this was today's televised Parliamentary Commons Business Select Committee at which Peter Mandelson completely failed to address the issue of longer term interests against near term hedge fund profits. Amid the unbelievable waffle of his answer was the statement that he had had 'a good meeting' the previous week about the subject which had brought about recognition of the need to promote the benefits of ethos. This must revive the 'Great' even if it is followed by BS.

So to return to Cadburys – near term benefits (cost cutting) will undoubtedly be necessary given the HUGE price paid. Investment will be difficult – the rest we know well given our 2020 vision of UK industrial decline over the past few decades.

Consider the following short list:-

Aircraft industry – owned by France, Italy, Germany

Defence industry – sold to France, Germany, Italy

Electronics companies – most of our companies, Decca, Ferranti, GEC, Plessey have gone to France, Germany, USA - in reality even British Aerospace is a US company

Motor industry - Aston Martin, Leyland, Bentley, Daimler, Jaguar, Rolls Royce - sold to China, France, Germany, India, Japan, Kuwait

Nuclear energy – sold to France

IT industry – France, Japan, Germany

Space technology – France, Italy

Even our basic need for water is provided by France

(I think France is taking revenge for her defeat at Trafalgar!)

Our leaders proudly proclaim that we have an open economy. Why is this considered such an important attribute? Other countries are not so open. Asian countries including China and Japan are closed. Are we right? Is everyone else wrong?

So what is left? We are one of the leading financial centres of the world. There has been a huge increase in the number of government employees during the last ten years with the attendant requirement for index-linked pensions to which all tax-payers contribute.

Oh yes, we 'do' ceremonial and tradition better than anyone else in the world.