That was quick – Tamara Minick-Scokalo quits Kraft. Ignasi Ricou goes too

October 12, 2010

Whatever is going on at Kraft’s newly swelled confectionery division (formerly known as Cadbury)? Two top executives are walking, both allegedly for “personal reasons”. And one of them – head of European chocolate Tamara Minick-Scokalo – was hired only a few months ago.

Ignasi Ricou, the other executive to depart, is just the sort of top management Kraft can least afford to lose. After the controversial $20bn Kraft takeover earlier this year, Cadbury operations accounted for about 80% of Kraft’s confectionery interests worldwide – and punched even further above their weight in fast-growing emerging markets. Clearly Cadbury management continuity – at least in the medium term – is critical to bedding down what Kraft has acquired. Ricou was apparently a showcase example of continuity in action. He joined Cadbury in 2003 and rose to president of European operations just prior to the hostile takeover bid. Post-merger, he agreed to stay on as head of European sales and the (high-margin) gum and “candy” business.

In some ways the trajectory of Minick-Scokalo has been even more bizarre. Originally from Procter & Gamble, she was parachuted into Cadbury in 2007 as global commercial director, then made head of European operations in late 2008. The graft didn’t take: after seven months in the new job, she was fired and Ricou took over. But that wasn’t the end of the story. By spring this year, she was back at her old job – well almost – helping to fuse Cadbury chocolate culture with Kraft’s. Evidently it has proved pretty immiscible.

And that’s not the only evidence of the post-merger fabric coming unknitted. Look around and you will find painfully few senior Cadbury executives still in command. Trevor Bond, who used to be in charge of Cadbury in the UK, has become Kraft overseer in Europe and now takes on some of Ricou’s role; there’s also Marcus Grasso in Brazil, and Mouli Venkatesan and Narayan Sundararaman in India.

One intriguing survivor is Mark Reckitt, formerly Cadbury’s chief strategy officer – who played a key role in integrating the two operations after the merger. Formally, Reckitt left in July. But he’s back in a consultancy role, one day a week, managing the shop at Green & Black, the organic chocolate division. It would be no surprise to find Reckitt – in due course – heading a management buyout of the operation. It’s difficult to see what alternative fate awaits a premium organic chocolate brand tucked among all those processed foods.

Irene Rosenfeld, Kraft chief executive and the takeover’s architect, will shortly be visiting these shores for the first time since the merger. On her agenda will be some factory visits and a bit of political schmoozing. It sounds as if she’s just in time to deal with a few unscheduled senior management problems as well. No doubt Rosenfeld will pass off Minick-Scokalo and Ricou as transitional management whose time had come to an end. I’m not sure Kraft shareholders will agree with her, though. Too much command and control from Northfield, Illinois would be my verdict.

I’ll keep you posted.

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Tamara Minick-Scokalo resurfaces as Kraft’s European confectionery chief

February 4, 2010

I’m reliably informed that the “senior role” at Kraft being taken up by former Cadbury European chief  Tamara Minick-Scokalo is head of European confectionery.

She will therefore be the pivotal figure in integrating Kraft’s existing product range – principally Toblerone and Milka – with the newly acquired brands at Cadbury.

Readers of this blog may recall that she left Cadbury in slightly mysterious circumstances at the beginning of last July. An American with 20 years experience in Procter marketing, Minick-Scokalo moved to Europe a few years back (she is based in Geneva) and took on the top marketing/general management roles at US wine maker E&J Gallo, then Elizabeth Arden. Two years as head of global commerce at Cadbury Schweppes followed. She afterwards became European president of the demerged Cadbury confectionery operation, in January 2009. As such, Minick-Scokalo sat on the Cadbury executive board, reported directly to chief executive Todd Stitzer, and had control over Cadbury’s confectionery operations in both East and West Europe: that is, over 10,000 employees, €1bn annual sales and numerous factories.

But Stitzer, up to this point her champion, let her go after only six months in what appears to have been a selective senior management cull designed to cut costs.

How fortuitous then, that Kraft should launch a takeover bid for Cadbury in September and, having sown up the deal a few days ago, hire Minick-Scokalo to mastermind the brands’ integration from March 1. Whatever else may be wrong with the corporate “merger” (Warren Buffett is the expert on that matter, not me) integration of the two confectionery operations in Europe looks like an obvious fit. Cadbury, outside the chocolate-gobbling UK, is a patchwork quilt in need of further rationalisation; Kraft, on the other hand, already has strong Euro brands in Milka, Toblerone and Terry’s.

I do hope the senior managers who stay on at Cadbury (the top three having already quit) were nice to Minick-Scokalo before she left. Ignasi Ricou, who succeeded Minick-Scokalo as Cadbury president of Europe, and Phil Rumbol, UK marketing director, will no doubt be polishing their CVs just in case.

I imagine she will also have a hugely enhanced fan club in the marketing services world. Ogilvy, for example, handles the Toblerone brand and JWT does Kraft corporate advertising. Fallon need not lose all hope, however. Minick-Scokalo championed the ‘Gorilla’ advertising campaign.

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There’s only one solution to doctors’ health messages: ban them

January 22, 2010

Better for your daily health requirements

Not long ago, if you bit into a Kraft Oreo, munched some McDonald’s fries or tucked into a Kentucky Fried Chicken leg, the chances were you would be ingesting a nasty, toxic substance called trans fatty acid. Consume enough of it and it won’t do your health any good at all. It’s known to cause heart problems, by promoting “bad” cholesterol at the expense of “good”; and it’s also a suspect in other disorders, such as Alzheimer’s, cancer, diabetes and infertility.

In small, probably harmless, doses, trans fatty acid is found in nature – especially in dairy products. The reason intake of the stuff reached epidemic proportions was because it can be synthesised easily and makes a cheap and superficially attractive alternative to butter-based saturated fats and lard. As such, it provides a useful shortening agent in baked products and can also be counted upon to extend shelf-life well beyond its natural span.

It is not a new discovery. The processed food industry has been using it, in increasing concentrations, for most of the past 100 years. The bio-chemical formula was first adopted by a UK company which later became a part of Unilever. In the same year, 1909, Procter & Gamble acquired the US rights and promptly launched Crisco, a shortening product that was based on hydrogenated cotton-seed oil (it still exists, but under different ownership, and in a different formulation). At the time, nothing was known of the lethal side effects of trans fatty acids. Indeed, the delusion continued to exist well into the sixties that trans fatty acids, found in various margarine products, were not only cheaper, but actually better for you.

What was the medical profession doing all this time? For most of the past century, it was being about as ineffectual in exposing the ill-effects of these fats as it was in combatting the well-known health-hazards of tobacco and alcohol. This was not because of a total absence of pathological evidence. On the contrary, indications of a possible connection with cancer began to emerge as early as the 1940s. There was reasonable doubt; it’s just that no one seemed to want to voice it in public.

I mention all this because doctors  have now adopted a high moral tone in calling for the banning of these man-made fats. The fact is, the horse has already bolted. Although Britain hasn’t – unlike Denmark, New York, California, Australia, Switzerland and Austria – actually prohibited the stuff, a quiet self-denying ordinance has already been put in place by UK food manufacturers and retailers. The latter made a pledge back in 2006 to eliminate it from all their own-label brands, which they have now fulfilled and Big Food is beating a hasty retreat. For this we have a public health campaign, BanTransFats.com, and the so-called Project Tiburon, to thank. It originated in 2003 with a court case against Kraft in California which then snowballed. I don’t recall the British medical profession being particularly vocal at the time. We had to wait until July 29, 2006 for an editorial in the British Medical Journal promoting “better labelling,” which seems to have stopped well short of calling for trans fats to be banned.

There’s nothing quite like jumping on a bandwagon, however, once someone else has got it rolling for you. A similar “bannist” tendency may be seen in the medical profession’s approach to alcohol advertising. No finer example of the genre exists than Professor Gerard Hastings’ recent polemical article in the BMJ.

His proposals for tightening up advertising regulation (to include among other things a 9pm watershed, digital and sponsorship restrictions) bear an uncanny resemblance to the recommendations just published by the Commons health select committee. Indeed, if I did not know better, I would have thought he had single-handedly masterminded them. So I don’t underestimate his influence as a lobbyist.

And yet, closely argued though the paper is, it somehow misses the point. Whatever impact marketing communications may have on increasing consumption of alcohol, it is scarcely the principal villain behind our lamentable ‘binge culture’. A better place to look for major remedial correction would be our unhinged drinking hours, below-cost supermarket offers (which most brands abhor) and a decline in social standards (not all of which can be blamed on the advertising industry). Hastings, however, is not notably interested in any of this. The true nature of his agenda is revealed in the last paragraph of his article, where he cites former advertising luminary David Abbott’s views on tobacco advertising. The only really satisfactory solution to alcohol advertising is to ban it, it seems.

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Will Kraft know what to do with Cadbury’s brands?

January 19, 2010

Now that Kraft has acquired the highly-prized Cadbury brands – and turned itself into the world’s largest confectioner ahead of Mars/Wrigley – will it actually know what to do with them?

First, let’s get something out of the way. There’s been a lot of phony sentimentality about Cadbury and its brands during this protracted takeover. The global geographical fit between these two companies is highly complementary and the cultural gulf far less of a chasm than it appears. Sure, Kraft is a machine conglomerate that munches brands for breakfast: I won’t waste time on that. But Cadbury is not quite the pure-play quintessentially British property it seems. A Quaker tradition and two hundred years of family history cannot disguise the fact that Cadbury these days is an international corporation like any other. Its key shareholders are American, its chief executive is American; the breadth of its markets is such that Britain accounts for a small part of them. Of a workforce of about 45,000, only 11% are based in the UK. Certainly it has proved an invaluable training ground for generations of UK marketers, who retain an affection for the company, and produced some great and quirky advertising (latterly through Fallon). But I doubt whether that has much bearing on how the company is regarded outside the UK.

The truth about Cadbury is it was – like a number of other great British corporate brands such as United Biscuits, Beecham, Boots and ICI – a relic of the British Empire. The Empire gave it favourable and abiding access to invaluable growing markets which would these days be recast as “emerging”. India springs to mind as a superior example. Nevertheless, just like the rest of these British brands, it created insufficient momentum to transform itself into a genuinely global corporation. Cadbury, whether as a soft drinks operator (Cadbury-Schweppes) or as a pure-play confectioner, conspicuously failed to crack the single greatest market in the world, the United States of America. Its long-term fate, in a globalising economy, could not therefore be in doubt. The surprise, if anything, is that it has taken so long to pass under the hammer.

That said, is Kraft the right global corporation to buy it? Whatever Kraft executives may say in public, the squeeze on Cadbury’s assets will start sooner rather than later. It will have to. Cadbury, it almost goes without saying, always meant a lot more to Kraft’s future than the other way around. A low-growth US-focused conglomerate in desperate search of high-growth emerging markets (such as Cadbury’s), Kraft needs not only to appease long-suffering investors (Warren Buffett being the largest) but to pay down a vast amount of debt it has incurred as a result of the takeover. By my calculations, this alone is about £7bn. The total figure is about £22bn. The near 20,000 jobs it shed and 35 sites it closed in the UK between 2004 and 2008 (mostly Terry’s) will be as nothing to the cost-cutting stringencies it inflicts on the Cadbury estate. Attila the Hun’s scorched earth policy may come to be judged mild by comparison.

Ultimately, however, there is a more important strategic issue at stake. Will Kraft know how to make best use of the brand culture it has acquired? I rather fear it won’t. Kraft is very good at text-book, incremental marketing. It knows how to build on existing brands by rolling them out internationally, as it has done very successfully with Oreo and will probably shortly demonstrate with TUC. It is less gifted in the new product development area. It’s hard to believe Kraft executives would ever have had the wit, or self-confidence, to acquire Green & Black’s; still less to build from almost nothing some of the world’s fastest-growing chewing-gum brands (Trident et al). You could, of course, argue that, thanks to Cadbury, the essential building blocks are now in place. All that is required of Kraft is to deploy superior resources to ensure that they are properly, if less imaginatively, exploited.

Even there, I find room for doubt. Mars, now it has acquired Wrigley, seems better balanced to exploit its global position; it remains essentially a confectioner. Kraft, on the other hand, looks like a corporate identity crisis in the making. Its confectionery elements remain only one part – admittedly a very important, unwieldy part – in the portfolio of a maker of groceries and “sweet snacks”.

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Is Kraft’s Crunchie approach going flaky?

November 4, 2009

Irene RosenfeldCadbury is not looking such an endangered species after a set of third quarter results from Kraft that failed to wow. Unlike Cadbury’s own sparkling financial performance unveiled the other week. Where was the sucker punch before the knockout blow –  a firm bid on the table by next Monday? Or maybe that was exactly the point: Kraft is seeking to lull Cadbury into a false sense of security before Kraft ceo Irene Rosenfeld delivers the coup de grace. “We remain interested but will maintain a disciplined approach” to the Cadbury bid was her muted gloss on the Q3 results. You bet she remains interested. If she fails to produce a convincing bid, she’ll soon be history. No one at Cadbury is in any doubt that she will deliver.

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Cadbury fights for its life

September 7, 2009

CadburyOne of our national treasures looks set to disappear. No, no,no. I am not talking about Sir Tel being replaced at Radio 2 by Chris Evans, but of Cadbury, which faces a £10.2bn hostile bid from Kraft Foods.

The chances of Cadbury retaining its independence after this unwanted intervention do not look good. Of course, it may not be Kraft that emerges the eventual winner. According to City analysts, the Kraft bid – though superficially attractive at a 31% premium to the pre-bid share price – is pitched far too low. What they have in mind is the same multiple that Mars paid for Wrigley last year, which would mean about £10 a share – a long way up from the 745p on the table. Also, only £4.1bn is in cash, so the bid is far from knock-out.

But maybe we’re getting too technical here. Cadbury is definitely in play and Kraft is, at first sight, better positioned to haul the booty away than Nestlé or Hershey. In fact, it cannot afford not to win; neither can its competitors stand idly by and let it. Here is a landscape-changing deal in the offing, which would propel Kraft to the world’s largest confectionery company in an industry where scale is increasingly important (as the Mars deal showed).

Nestlé and Hershey would have considerable problems with the competition authorities (even if they divided the spoils between them), but there are few apparent conflicts of interest affecting a Kraft/Cadbury combo. Kraft, which owns Milka, Terry’s and Toblerone, is strong in confectionery in Europe and Latin America, where Cadbury is weak. Cadbury, on the other hand, offers Kraft a high-growth gum business and exposure in a number of invaluable emerging markets.

Kraft has suggested it will keep the Somerdale factory going, which Cadbury itself is threatening to close. That’s politically astute, but it won’t alter the fact that any alternative Cadbury owner will have to make some medium-term decisions likely to squeeze the culture out of the acquired company. Nestlé did no less when it acquired Rowntree, another Quaker company, over 20 years ago. There will be too many cost synergies involved, debts to be paid off and shareholders appeased, post-deal, for Cadbury culture to be maintained in aspic.

What of the brands? The Cadbury Dairy Milk kids may well twitch their last in one big wide-eyed rictus, which would be a great pity. But, if the Kraft deal does come off, I know someone likely to come out smiling. Kraft places a fair bit of its promotional spend with JWT, which also has a toe-hold in the Cadbury gum business.

And lastly, what of Nestlé? If Kraft triumphs in the takeover battle, that will leave Nestlé’s carefully laid plans for becoming the dominant global confectionery player in tatters. There’s more on this in my column this week.

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