Tuesday, September 15, 2009
Implications of a possible takeover of Cadbury's by Nestlé
Nestlé, one of the four most boycotted companies on the planet, is apparently considering a takeover of Cadbury's - a venerable UK chocolate company.
Somebody has already posted a petition against the takeover here:
While there are competition issues pertinent to the takeover, Nestlé refused to accept a ruling against its takeover of the Garoto chocolate company in Brazil - also an old family firm - from the competition authorities. Nestlé was warned at the outset not to integrate the businesses and reportedly signed an agreement saying it would undo the takeover if the competition authorities ruled that it should. However, it embarked on a five-year legal battle that eventually overturned the ruling against the takeover on the technical grounds that the authorities had taken too long to issue it. Nestlé is now reported to control 70% of the Brazilian chocolate market, reaching 100% in some sectors (see this Portuguese article).
A monopoly supplier is bad news for consumers as it means there is no price competition to keep prices down. But Nestlé has also been accused of price fixing in the US chocolate market with Mars and Hershey (its possible partner in the Cadbury takeover). See:
Nestlé is the target of a boycott because of the way it pushes its baby foods, putting its own products before infant health - and then misleads people and spies on campaigners to try to protect its reputation. See:
Cadbury's has a better reputation; recently it brought one of its leading brands into the fairtrade system, more than tripling the market paying fair prices to Ghanaian cocoa farmers. See:
By contrast, Nestlé is accused of failing to act on child slavery and other child labour in its cocoa supply chain and of using the Fairtrade mark awarded to a token coffee product to divert criticism of how it treats farmers. See:
It remains to be seen whether Cadbury shareholders will consider taking the money of such an unethical company, which will see their famous brands added to the boycott list.
There are other reasons why they may wish to think carefully. In 1986, Nestlé made a hostile takeover of Rowntree, another old family chocolate firm. Despite promises to protect the UK operation, Smarties production eventually moved to Germany, Black Magic to the Czech Republic and Dairy Box to Spain. In 2006, 645 people were made redundant as a result of these changes.
Tony Randerson, Amicus officer for Nestle Rowntree in York, spoke out about the way the remaining workers were treated:
“Management have made clear that unless our remaining members accept significant cuts they face the same fate as their colleagues who have already lost their jobs.
“We are making clear to the company that although we will work with them to ensure the plant is viable and, if necessary, cost savings are made, eroding hard won and hard fought for pay and conditions and threatening employees with the sack is not an acceptable way to operate.”
Nestlé not only continues with such practices, it rewards managers who implement them: in other news, Nestlé is appointing the Chief Executive Officer of Nestlé Philippines to head up the global infant nutrition business. It is in the Philippines where Nestlé is accused of ignoring court rulings regarding its refusal to negotiate pension rights with workers and of targeting trade unionists. This case is featured in the Nestlé Critics report submitted to the UN Global Compact office earlier this year. See:
It was in the Philippines were Nestlé baby food marketing was exposed, alongside that of other companies, in a film produced by UNICEF. See:
Our July 2009 Campaign for Ethical Marketing action sheet features Nestlé targeting of mothers in the Philippines amongst other cases. See:
Any chance of a change in direction in baby food marketing should not be expected with the CEO ultimately responsible for these practices in the Philippines during the last 5 years being promoted to run the global operation.
We will remain vigilant in monitoring Nestlé's baby food marketing practices. Having to spend time revising boycott materials to include Cadbury brands is something we could do without.