Why does kraft want to buy cadbury

But the Indian-Western medley ultimately failed to excite consumers. The good news is that India is a snacking haven, with every state having its own vast array of sweet and savory treats. Kraft is hoping to make the most of that opportunity. The American food giant entered India in in a joint venture with Chennai-based Kothari Group to manufacture Tang, its powdered orange drink.

The launch of the premium-priced drink mix coincided with the introduction of cent milliliter bottles by U. With Tang making little headway in a price-conscious market, Kraft beat a hasty retreat a year later. The key is not where to introduce its products, but what to introduce. Sometimes, it has been a matter of trial and error. In China, for instance, after it launched the American version of its Oreo cookies, sales were flat initially.

Research showed that both the product and price were problems: The cookies were too sweet for the Chinese palate, and the cent pack was considered too expensive. Kraft then developed less sweet Oreos in smaller packs costing 29 cents.

With the Kraft-Cadbury deal, Hershey may have missed its best chance to escape the confines of the mature U. Hershey was hamstrung by its unique ownership structure in which it is controlled by a charitable trust. The deal also makes the new Kraft and Mars-Wrigley the confectionery behemoths dominating a market with distant rivals, such as Ferrero.

Kraft said the deal would add to earnings per share by around 5 cents on a cash basis and give a return on investment at a mid-teens percentage rate, well in excess of the cost of capital. Kraft said it does not expect any major divestitures. Kraft was advised by Lazard, Citi C.

N , Morgan Stanley MS. Global Markets Updated. Stock prices of several food companies soared, including shares of H. Heinz Co. Kraft's offer "looks like an opening gambit," Warren Ackerman, an analyst at London-based Evolution Securities, wrote in a report Tuesday. Rosenfeld declined to comment when asked during a conference call Tuesday about a sweetened offer, saying only that Kraft would be "disciplined" in its approach.

If Kraft succeeds in acquiring Cadbury, the maker of Kraft Dinner, Maxwell House coffee and Oreo cookies will vault from a bit player in the candy and gum business to the world leader commanding 15 per cent of the global market. It would also give Kraft entry into several developing markets, such as India, where it has limited presence.

Kraft generates 60 per cent of its total sales from North America and only 20 per cent from developing countries. By contrast, 40 per cent of Cadbury's sales come from fast-growing emerging markets. Buying Cadbury would also further an ambitious restructuring Ms.

The American company is stuffed full of big names such as Maxwell House coffee, Philadelphia cream cheese, Oscar Meyer frankfurters and Kraft cheese slices. But many of these have been around for years and are in unexciting market sectors. One reason is Cadbury's shrewd distribution strategy. Kraft has concentrated on traditional supermarkets and groceries, where margins are lower, and it sees opportunities in getting its snacks on the same shelves as Cadbury's. Another logic for the takeover, in Kraft's eyes, is international growth.