How to destroy a family business
Cadbury was one of the great British family companies. The Birmingham-based Quaker clan who founded it back in the early 19th century virtually wrote the book on how to combine family values with keen commercial nous, enlightened philanthropy and an honorable tradition of commitment and engagement to its workforce and community.
The original idea to replace alcohol with cocoa as a source of pleasure and clean water is in itself highly laudable. The company won their way into the hearts and minds not just of the British public over two centuries but confectionary consumers everywhere. At its independent peak it turned over five and a half billion pounds annually.
As a public company – the Cadbury family sold out and ceded control many decades back - it was well run and profitable, and yet, in less than six months, it fell for £11.5 billion to a determined overseas predator, Kraft Foods, funded by a bank owned by the British taxpayer: RBS. As the cuts and rationalizations come through – the operation is now run from Zurich – many Brits have been left wondering how this can be in the public interest?
Kraft looks like a lesser business. Felicity Loudon, the great grand-daughter of George Cadbury, attacked Kraft during the takeover battle as “a plastic cheese company.” It’s hardly on the cutting edge of the healthy food revolution relying on a heavily processed mix of squeezy cheese, meat pates, Oven Fry, Oreos and Oscar Mayer’s “cold cuts.” (Not that there’s much, in truth, that your doctor would recommend in a diet comprised of Cadbury staples, the Curly Wurly and the Crème Egg.)
The fallout from the whole takeover has been a PR disaster and bad enough to lead to soul-searching even among the most hardened market economists about protecting national institutions from foreign “predators.” Irene Rosenfelt, the chief executive of Kraft, has managed to anger and alienate all sorts of interested parties. Most of all the UK parliament’s select committee in front of whom she has consistently declined to appear to explain her actions.
The Cadbury affair raises all sorts of questions. Most philosophically “What is a business?” Is it just a clutch of shareholders certificates? What is the true meaning of stewardship in a family company? One also wonders how the Cadbury family could have achieved their “liquidity moment” without making their creation so vulnerable.
Why, for example, couldn’t they not have floated their company on the stock exchange but agreed that over a period of a decade it could be sold to its employees. The family could have withdrawn a super dividend every year and gradually transferred ownership across. They would have made enough to retire very wealthy or pursue other interests if they felt chocolate wasn’t their game. That way they could have left behind an enduring structure worthy of the family name.
A year on from the confectioner’s sale the former Cadbury chief executive Todd Stitzer has said he is “inestimably sad and frustrated” by what happened on his watch. Stitzer, an American lawyer who had worked for Cadbury for 29 years wrote in The Times under the headline I am richer at the bank but sadder in my heart: “In the end we created significant shareholder value. The paradox is we lost the company. As a capitalist I should feel elated, but a year on I feel only the hollow sense of a great company lost.”
That is some admission. What the company’s founder John Cadbury thinks - he began grinding his coca beans by hand with a pestle and mortar in 1824 on Bull Street Birmingham – we shall never know.
