In an exclusive interview with The Grocer, Cadbury's Trevor Bond tells Adam Leyland a takeover - by Kraft or any other player - is far from inevitable


A 23-year veteran of Cadbury, Trevor Bond has been around the block, as it were. So when a letter landed on the desk from Kraft on Friday last, proposing a £10.2bn takeover of the British confectionery brand, he carried right on chewing. "I didn't crash the car or kick the cat, if that's what you think. I've been around long enough to remember General Cinema in 1988, [when the US conglomerate made a hostile takeover bid for Cadbury] and Nelson Peltz [the gorilla-like investor activist who demanded the breakup of Cadbury Schweppes]. These things are to be expected in business," says the president of Cadbury's UK and Ireland division.

Indeed, a bid looked inevitable from the minute Cadbury devised its confectionery-only business strategy two years ago. By hiving off the beverages arm in May 2008, Cadbury created a more focused but much more easily digestible business, especially now debt is so much harder to come by.

But Bond rejects suggestions that Cadbury is too small. "I wouldn't say Cadbury is a bite-size company by any stretch," Bond tells us, in the first official interview with the world media since the bid first emerged. "We are a very big business, a global business, a sustainable business.

"Cadbury has leadership positions in more than 20 of the world's top 50 confectionery markets, including the largest, fastest-growing and most broadly spread emerging markets business," he says. "If we don't include the US, we are the largest confectionery company in the world."

But it's not just about size. The measure of success is about delivery, and by focusing on confectionery, Cadbury is a much more effective long-term bet, he argues.

"We are halfway through Vision Into Action [a four-year business plan announced in 2007] and confident that we are well on the way, in terms of execution. We can give shareholders a great return as we have with growth above the category average and on trading margin, and for the past six years have grown our confectionery share. Our plan is to continue that."

Cadbury was criticised when it was a much larger business for lacking focus. You can't have it both ways, says Bond. "We know confectionery. This is what we do. We are having some fantastic results with customers because we understand the drivers of confectionery and we deliver."

With responsibility for the UK and Ireland, Bond sees this daily at a local level.

"With innovations such as Trebor gum and Wispa Gold, we have focused on more moments of pleasure for consumers and that's giving our customers and shareholders what they want, too."

Together with operational restructuring, these innovations have resulted in a 180-basis points increase in Cadbury's operating profit margins, helping Cadbury exceed growth targets, improve market share to 11%, increase dividends and improve ROCE.

But just as important is the work that's going on to improve relations with customers, and Bond cites recent success in The Grocer Gold Awards in June as a sign that Cadbury is moving in the right direction. "Our relationship with our customers is good but together it can get better," he says.

Nor is Cadbury past its sell-by date as a British business. Its roots as a global brand stretch back almost as far as the business itself ("In India, they don't call them cocoa trees, they call them Cadbury trees"), and it has remained modern and relevant by reinventing itself, says Bond, pointing to the recent decision to use Fairtrade-only cocoa in the Dairy Milk range.

"It's not just that we are selling more, it's how we sell it. We are unique here as a major confectionery brand. The values behind the brands and the values our consumers aspire to are as one." 

Exports
While a British brand, it's essential, says Bond, that the media understand the global nature of the business. "Our developing markets are real powerhouses of confectionery talent and performance, and you've got to believe that as these countries grow in wealth and population terms, so will Cadbury."

Emerging markets accounted for 69% of Cadbury's sales growth in the first half of 2009, and Bond sees no reasons why it can't continue. While unable to make projections under takeover rules, he can point to countries such as India, where the chocolate market is worth $465m versus $4.9bn in Britain.

"We're now working with Tesco's wholesale arm [established in India since 2008] to develop our business there." With supermarkets representing only 10% of Cadbury's business in India, there is no shortage of low-hanging fruit.

And Bond believes there is similar potential in Brazil, where Cadbury is already market leader, and across Africa. "These businesses are not just about current growth, there is very significant potential," Bond says, due to growing wealth, population and better routes to market.

Acquisitions
So, is it inevitable that Cadbury will be gobbled up? And if not, how can Cadbury protect itself from corporate raiders? Bond believes success is the best defence. "Being a good company, a good business. That's how we will remain independent. There's a price for everything, of course, but I do think it's encouraging that one of our major shareholders, Legal & General, went on record in support of our position.

"It's up to the board to do what's in the best interests of the shareholders, but there's nothing inevitable about this. There isn't even a bid on the table."

Bond also doesn't rule out acquisitions in the future. "Who knows what's going to happen? Our focus at the moment is on delivering VIA. But we have an impressive track record of integrating acquisitions, from small ones such as Green & Black's, to very large ones, with the Adams business, most recently."

Indeed, while Trident's sales in the UK appear to have stalled prompting Cadbury to launch Trebor Extra Strong Mints gum Bond believes the rollout of the former Adams gum brand has been an unqualified success, with global market share rising from 7.7% at the time of the acquisition to 10.8% in 2008 [Euromonitor]. He also hasn't given up hope on future innovation at Trident, with new product development coming on-stream in the US that may yet transfer over here.

Bond believes good may come of the bid. "You've seen in the past, when M&A has come and gone, the market rerated. It may be that [analysts] come to realise the need to revalue."

In the meantime, Bond is focusing on the day job. "We need to hit September's numbers, the quarter's numbers. I'm confident we will."

Topics