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Cadbury purchase gives it distribution and clout in developing markets
KRAFT FOODS' agreement to purchase British confectioner Cadbury for more than $19 billion - the culmination of a four-month courtship - is testament to the growth categories major U.S. marketers crave, particularly in developing countries. The purchase would put Kraft atop the $167 billion global confectionery market, and ensure that one out of four of its sales dollars comes from developing markets.
The need for the global scale Cadbury affords is demonstrated by the fact that Kraft sold off its U.S. frozen-pizza business to raise funding for its bid. A single brand in that portfolio alone - DiGiorno - posted at least 20% growth for the last two quarters, but Kraft sacrificed pizza because it doesn't have international distribution channels to support frozen products, and the expense of building the proper distribution would have outweighed the rewards.
That's not the case with confections, where Cadbury has a rich distribution channel. "We're looking at focusing on high-growth categories, and clearly confectionery is...