KRAFT Foods' acquisition of Cadbury in Australia will be a David and Goliath affair, with the cheese and Vegemite group outmatched on nearly every front by its Cherry Ripe-making rival.
Kraft, which has annual revenue of $US40 billion ($43.3 billion), is paying $US21 billion for the British confectionery stalwart, which makes £5.6 billion ($10 billion) in sales each year. But in Australia, Cadbury's businesses are almost twice the size of Kraft's.
Here, it has fatter profit margins and earns almost three times as much as Kraft - almost $80 million after tax last year, according to Ibisworld. It employs almost four times as many people, with more than 2500 workers at its three manufacturing sites and its offices.
There is some concern among retailers about the strength of global brands - Kraft and Campbells (owner of Arnotts) account for 80 per cent of the biscuit market between them. Combine that with Cadbury's near 50 per cent stake in the Australian confectionery market and there is considerable pricing power.
Oddly, Kraft justified its takeover offer last year by saying that it needed sufficient global product scale to put it on a more equal footing with its retail chain customers.
The companies, which have their headquarters in Melbourne, were silent yesterday on fears of staff cuts at Cadbury, especially given Kraft's record for ruthlessly paring costs and shrinking its local operations over the past decade.
Kraft employs about 650 people, half its workforce of 2003, and has little manufacturing beyond Port Melbourne, where Vegemite, peanut butter and salad dressings are made.
A Kraft spokesman said the company did, however, have about 10 product-sourcing arrangements with other factories, such as its cheesemaking operations in Strathmerton in Victoria, which it sold to the Bega group in exchange for Bega making Kraft products. Such arrangements mean it can claim about 85 per cent of its products sold in Australia are made in Australia.
Observers said that the impact on shoppers should be minimal. Kevin Moore, the head of a retail marketing services company, Crossmark, said that because there was little overlap between the two companies' products, he expected there would be few changes in the line-up of brands on shop shelves.
''This is not Ford or Holden coming together. So it is not going to be a question of … having to choose between a Falcon or a Commodore.''
The marketing sector will wait to see what if any fallout there is from the takeover. Mindshare in Melbourne handles Kraft's estimated $15 million-a-year media-buying. Its advertising is created by JWT and Badjar Ogilvy. Cadbury's agencies include Saatchi & Saatchi in Sydney, George Patterson Y&R in Melbourne and Publicis Mojo. In 2008 Cadbury increased its advertising budget to $22.8 million, according to Nielsen.
