PITCH INSIDER Planning for a business and a half
Now that the dust has settled on Kraft Foods’ surprise buy-out of a once solid British brand, media decisions are starting to filter through on a market-by-market basis, starting with the US and UK
When Kraft Foods was first bidding to take over rival confectionary company Cadbury it claimed “efficiencies and economies of scale in marketing, media and selling expenses” between the two companies could amount to $125m. The process of achieving that has started with media decisions being made in its two home markets.
In the US, the consolidated Kraft/ Cadbury media planning business went to a joint MediaVest/Digitas operation, named the ‘One Team’. Horizon Media was the loser, although it keeps Cadbury’s gum and sweets brands. In the UK, Kraft incumbent Starcom lost out to Cadbury incumbent PHD. Although other markets are on the alert there have been no other pitch announcements to date, but agencies are on the lookout for what these early consolidations mean for them. Consolidating the UK business into
PHD rather than Starcom might be surprising when global consolidation is otherwise the name of the day. That is until you take into account two factors. First, PHD has been Cadbury’s agency through the creation of some of its most popular ads, including Gorilla. Starcom’s performance for Kraft in the UK has not been nearly as widely-acclaimed. Second, the need to preserve UK independence is crucial when public feeling against the merger and the risk of losing “yet another” British brand remains high. The differing outcome also
indicates that a market-by-market approach will prevail, which makes sense considering the scale of integration the two companies need to
Pitch download Brands include:
Kraft: Milka, Toblerone, Oreo, Philadelphia. Cadbury: Dairy Milk, Cream Egg, Wispa, Crunchie, Roses
Company strengths:
Kraft is particularly strong in the grocery channel in North America and western Europe, compared to Cadbury’s stronger positioning in instant consumption channels. Combining the two gives greater potential for higher margins and growth
Financial performances:
In Kraft’s latest financial results, most of its growth came from Cadbury brands and Cadbury markets, explaining its reasoning for the takeover and presenting a clear business challenge
“Agencies used to be way out in front. Now clients are ahead – and the consumer is ahead of all of us”
conduct. Announcements on market management are still trickling in. At the time of takeover Kraft said it
would pursue a “best of both” approach, emphasising the complementary nature of the companies’ global footprints. Kraft has strength in Brazil, China and Russia; Cadbury in India, South Africa and Spain. It is quite plausible then that the combined company opts for the chosen agency relationships of the more powerful player in each market. In general, Cadbury followed a far more decentralised approach to its marketing, making global consolidation difficult. But with new-found leadership status in many markets, it is unlikely that any arrangements will be long-lived. No-one should be shocked if further consolidation follows within the next couple of years. ○
THE CONTENDERS UNDER THE MICROSCOPE STARCOM MEDIAVEST GROUP Starcom MediaVest holds the vast proportion of Kraft’s business worldwide, and it also handles Cadbury in 12 territories. The prospects for significant wins for SMG, on the back of its US win, are therefore high.
CARAT
Carat holds Cadbury in 10 markets – some of which are the brand’s strongest – and Kraft in the key growth market of China, so it stands to gain as long as the combined company sticks to a market- by-market approach.
Leading lights:
On the conference circuit last year, chief marketing officer Mary Beth West emphasised the importance of data and creativity being borne from insights, and the correct interpretation of those insights. She argued that marketers need to be “walking not just a mile in consumers’ shoes, but two miles”. On agency capabilities, she said: “In the old world, agencies were way out in front of clients, now clients are ahead of the agencies – and the consumer is ahead of all of us”
Activity to watch:
The first combined buy for the company has already taken place in the US, where Kraft has become the first food company to produce long- form branded content for cinema. The activity promoted Oscar Mayer Lunchables, Cadbury’s Stride gum and Ritz crackers.
For up-to-date news go to
mandmglobal.com
Other agencies include: DraftFCB; EuroRSCG; Fallon and JWT
PHD
Although Mindshare currently handles more of the business, PHD’s chances look good now its hold in the UK has been confirmed. PHD has managed to improve its pitch success rate of late, as its network becomes more established.
M&M Q2 2010 15
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