Cadbury buyout to help Kraft expand presence in developing mkts

I / Chicago January 20, 2010, 13:56 IST

Kraft Foods today said its proposed $19.6-billion acquisition of Cadbury will help the company expand its presence in the developing markets, including India, by leveraging the infrastructure the British candy maker has set up in these markets.

One of the "single biggest opportunities" the company gets from buying Cadbury is that it enables "us to fill out geographical white spaces and put our portfolio of products through Cadbury's infrastructure in markets like India", Kraft Chief Executive Officer Irene Rosenfeld said.

Yesterday, the Illinois-based firm had sealed a deal to buy Cadbury for about $19.6 billion (11.9 billion pounds), ending months of bitter wrangling over the price.

"Together, we will have over 40 brands with revenues of over $100 million," Rosenfeld said, adding the buyout would help Kraft, besides expanding its footprint in developing markets, capitalise on population growth trends and provide scale to invest in infrastructure in key geographies.

The percentage of Kraft's net revenue from developing markets will also increase from 20 per cent to 25 per cent when combined with Cadbury, she said.

"From Kraft Foods' perspective, Cadbury gives us meaningful entry into India," she added.

The deal would enhance Kraft's long-term revenue growth from 4 per cent to over 5 per cent.

The firm, which makes Oreo cookies and Velveeta cheese, expects the deal to close in mid-February.

Through the deal, which would create the world's biggest confectioner, both the companies seek to have leading positions in Brazil, Russia, India, China and Mexico.

The percentage of Kraft Foods net revenue from developing markets will also increase from 20 per cent currently to 25 per cent when combined with Cadbury, she said.

"From a Kraft Foods' perspective Cadbury gives us meangingful entry into India," she added. The deal enhances Kraft's long-term revenue growth from four per cent to over five per cent.

Kraft, the maker of Oreo cookies and Velveeta cheese, expects the deal to close in mid-February. "Kraft Foods and Cadbury have highly complementary geographic footprints," Rosenfeld said.

Importantly, a combination would increase scale for both companies in markets where the two do not have significant presence, she said.

The combined group would also benefit from an improved position across Europe, including in France and Spain.

The company said its strategy going forward would be to focus on becoming a leading snacks, confectionary and quick snacks company and to exit from the lower growth and lower margin businesses.