Many changes in food sector from hostile takeover

by Morton Sosland
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The first hostile takeover in the global food business in a long time — the effort of Kraft Foods Inc. to acquire Cadbury P.L.C. — has already produced important “side” events extraneous to the business at hand, but exceptionally important to the future of global food. The most significant of these was Kraft’s sale of its frozen pizza business to Nestle in a transaction valued at $3.7 billion. While less than the $16.6 billion Kraft is offering to pay for Cadbury, this entry into this important sector of grain-based foods by the world’s largest food company has important implications.

Considering the possibility of Hershey competing with Kraft in buying Cadbury, the entry into this fierce battle of Kraft’s largest shareholder, the renowned Warren Buffett, and the chance of more surprises from Kraft and other food companies, it is apparent that the repercussions of all of this have definitely not played out. Similarly, having Nestle as the leader in America’s frozen pizza category emphasizes a newfound willingness on the part of this giant enterprise to enter grain-based foods in pursuit of businesses offering attractive margins and good growth.

In what was a coincidence of timing, Nestle announced nearly simultaneous with its purchase the opening of a new research and development center “for biscuits and cereal-based snacks,” which it describes as ”a very important category.” The center, in Chile, but with global reach, will focus on developing more tasty and more nutritious biscuits. Doing the same for pizza might also be in Nestle’s strategy.

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