IIPM: Danone deal not a great recipe

However, due to the rising competition, Kraft has been looking towards f

urther supplementing its brand portfolio, especially its cookie business, which, according to sources, contributed 15% to FY ’06 revenues. States Rosenfeld, “The growing high margin business will give Kraft another core growth category in Europe, a cornerstone in emerging markets & the best portfolio of iconic biscuit brands in the world.” On the other hand, Danone wishes to focus more on fresh dairy products, spring-water based beverages & mineral waters.
Analysts believe that Danone was enticing because of its penetration in India & Latin American markets. Since Danone’s business in these markets is not part of the deal, the money involved is simply outrageous! Kraft shares dropped by 2.5% in value by the afternoon of July 3 to reach $34.6. Though Kraft has promised not to close any plants for at least 3 years, French laws are notoriously cumbersome for such deals to go through easily. The tough bargaining French worker unions may add to problems, making the deal much less appetising for the $34.6 billion Kraft . And it all started with a notoriously sweet tooth!

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Source: IIPM Editorial, 2006

An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative