BUSINESS / CHOCOLATE SPECIAL ......................Remaking Cadbury India

Remaking Cadbury India





The cascading effect of a global takeover has effectively turned this 60-year-old Indian company into a startup with new shareholders, new product categories and brands, new leaders, a new identity and culture. New CEO Manu Anand has the unenviable mandate of managing such unsettling change without taking his eyes off growth

About 5,000 employees of Mondelez India, the almost unrecognisable new avatar of what was formerly Cadbury India, left their Peddar Road, South Mumbai HQ of over 50 years, and have just moved to a new home in India Bulls Finance Centre, Parel.

The geographical relocation is symbolic of both pain and excitement that many old and new executives are respectively experiencing as the 60-year-old company emerges out of two forced, tumble-dryer style makeovers triggered by rapid ownership changes.

First, Kraft Foods acquired Cadbury globally in January 2010 in a hostile takeover. Next, in October 2012, Cadbury and all non-grocery businesses of Kraft outside North America -including Nabisco, Oreo, Trident, etc -were lumped together and spun off into a new company named Mondelez and listed on the New York stock exchange.

Consequently, in India, what was once Cadbury has become Mondelez. What was once a pure play chocolate business now includes biscuits, chocolates, gum and candies and hot and cold beverages. What was once a distinctly British, purple passion culture with abundant freedom for local decision making will now need to make way for an aggressive American, more centralised model.
One Anand has given way to another. Anand Kripalu, CEO of Cadbury for nine years, has movedoutandnewCEOManuAnandhasbeen running the company for 10 months. Seven out of 12 directors in the company are new.

In effect, the 60-year-old company has just become a startup with new shareholders, new product categories, new brands, a new CEO, new leaders and a new identity and culture.

Irene Rosenfeld, chairman and chief executive officer, calls Mondelez International the world's largest startup. Mondelez is at the same time both a 20-month-old baby and a $36-billion global snack giant. And, as it seeks to create a new culture, it has both the assets and burdens of a 100-year-old legacy.

“Within 24 months, we moved from Cadbury to Kraft to Mondelez. So, moving from each would lead to a different focus,“ says Manu Anand. “There will be new ideas and a different perspective and a blend of the old and new...a mindset change has to happen.“

And, as Anand points out, all this tumultuous change happened deep in the throes of a global economic meltdown.

Seen in this perspective, moving to a new HQ is the least of changes that have swept through what was once Cadbury India. Change Mondelez India is a complex bundle of paradoxes. Manu Anand says the organisation is still evolving. The key for the road ahead is to understand “the `why' of the change, rather than the `what' of the change,“ he adds.

Anand has the unenviable mandate of managing such unsettling change without taking his eyes off growth.

Rosenfeld wouldn't have it any other way.
She is keeping a hawk's eye on India. She spearheaded the $21.8-billion hostile takeover of Cadbury and the Kraft-Mondelez carve out after that. Mondelez shareholders expect her to deliver. Growth in developing markets including India, which already brings in 44% of the firm's global revenues, is her best bet.

“Despite economic challenges in many emerging markets, our India business continues to post strong double-digit growth,“ she told ET in an exclusive email interaction for this story. “For us, emerging markets like India are essential to drive our longterm growth and deliver top tier financial performance, she also told analysts recently.
“We've invested ­ and will continue to invest ­ in India to build production capacity, support our power brands and global innovation platforms, and strengthen our route-to-market and sales capabilities.“

Mondelez has already announced plans to invest $190 million to build the country's largest chocolate manufacturing plant near Hyderabad.

The company though is coming off a weak year (2013), when its growth rate was in the low teens, its lowest since 2005. It grew 21% in 2012 and over 30% in the preceding years.

But things have picked up this year. Its market share increased by 2.5 percentage points in a category that continues to grow about 20%. “This momentum, together with our investments to reinforce this growth, gives us great confidence in the ongoing success of this business,“ Rosenfeld told ET.

Anand is the man in charge of delivering on this.
Old Organisation, New Top Team Anand needs to steer Mondelez on the growth path even as he needs to rip apart and reshape the organisation. He is dealing with two major areas of churn.

First, almost the entire top management team is now new; Anand himself is from Pepsi and the top team of 12 includes seven who have joined from Unilever, Vodafone, Castrol, etc in the last 12 months.

“There is a new management, but the rest of the company remains the same,“ says Alpana Parida, president, DY Works, a brand design firm. “So, the challenge is how do you take two different companies, the old and the new cultures together, to drive growth and define new strategic spaces.“

The second big churn is on the product front. The former Cadbury organisation was predominantly geared to focus on one product category ­ chocolates. Now, it has to reinvent itself to sell biscuits, cold and hot bevereages, and gum and confectionery.

“This is still a young culture and evolving. What we are instilling in our organisation is a challenger mindset,“ says Anand. This, he says, is needed not only in newer categories, but also in chocolates, where it is a market leader. “There is new competition in the chocolates category. We should adopt a challenger mindset here too.“

This is a deep change. Industry sources say it is never easy for executives in a company, which has enjoyed decades of leadership, to adapt to a challenger mindset. Inevitably, there is resistance; even more so when the change is abrupt and forced as it is in a hostile takeover.

Company and external sources estimate that 200-plus senior executives across func tions such as supply chain, IT, sales, legal and finance have resigned since Kraft acquired Cadbury. Former CEO Anand Kripalu quit in September 2013. “When an organisation is acquired by another in a hostile takeover, aggressive change in inevitable,“ says a senior Cadbury official who has now settled well into the Mondelez system.

Anand, who emerged out of an intense 90day on-boarding programme to interact with employees across the organisation, says he has been spending a lot of time with the next two levels of leadership to explain the `why' of the transformation, persuading them to take the message down the line.

It hasn't been an easy task; it's even been acrimonious at times. Ex-employees alleged that Mondelez selling the Cadbury Mumbai headquarters for reportedly `400 crore in November 2013 was an asset stripping excise. Mondelez officials say the new growing organisation is hiring more employees and needs more space.

The challenge for the new management is to ensure leadership by winning the trust of all employees, says a top ranking ex-Cadbury India official. “There was commitment by the earlier Cadbury team that meant doing things beyond the call of duty, driven by motivation and not fear,“ he adds. This should be the spirit of change.

“There is no band aid solution except paying close attention to daily exchanges and interactions between the hardcore Mondelez managers and the remaining employees of Cadbury,“ says Dr S Raghunath, dean(admin) & professor-corporate strategy and policy, IIM-Bangalore.

Mondelez is trying gamely. An 18-month Leadership in Partnership module to integrate old and new members of the new leadership team is on in full swing. The top 50 members of the extended leadership team have also met together.

Rajesh Ramanathan, executive director, human resources, is a rare constant amidst all the change. He was heading the human resources function for Cadbury India and continues in that role in the new dispensation. He is also pragmatic about change. “You cannot have an aggressive culture because you can't be selling candy and be mean,“ he says.

Mondelez recently hired a couple of senior managers from Procter & Gamble.
Ramanathan says their first take on Mondelez is that it is an engaging place. “We are very conscious that we are a young-old organisation and so people have to be able to access resources very quickly,“ he says.

“The top management may have to send a strong message within the organisation that middle-level managers will have to work flexibly, show respect towards the people from the Cadbury house and acknowledge their contributions, says prof Raghunath. “They will need to negotiate and persuade, rather than command and direct to succeed with the next level of growth.“

The Products Puzzle Anand's second big challenge is driving greater synergies in a diverse set of brands and product categories that have only recently come together under one umbrella. “From a chocolate company, we are now a visible multi-category company,“ says Anand. “The scale has also changed.“

Mondelez's immediate challenge is to take the biscuits story forward, says Sunil Alagh, chairman of consulting firm SKA Advisors and former CEO of biscuits major Britannia “Oreo was a relatively easier play because of the chocolate foundation. But salty biscuits from the Nabisco range in their portfolio can be tough.“ Oreo was launched in India in 2011 and is already the fourth-largest market for Oreo in the Mondelez International World.
Chocolates and biscuits also demand vastly different distribution strategies, adds Alagh.

“The name Cadbury evoked indulgence and pleasure. Brands such as Tang and Bournvita were at some distance from the core business. It will be interesting to see what the Mondelez promise is,“ adds an industry source.

The CEO of another food company also points out that the advent of new categories and brands could dilute the company's focus on what is still its core ­ chocolates. It still brings in 90% of Mondelez India's `4,000 crore-plus revenues. “Categories such as chocolates are also struggling with input costs and growing competition. So, ensuring that they are protecting their turf there and driving growth in new, fiercely competitive categories will be challenging“ he says.

Building premium offerings to improve profitability is another challenge. “Like most MNCs, I see Cadbury also diluting formulations,“ says an industry source. “The original silk chocolate launched is not the same today. The advertisements have changed where you could lick the melting chocolate off your finger. They have put emulsifiers into it and hardened it. So, launching a good product and then diluting it later can bite the company in the back.“

“We have worked on in-store impact, installing visicoolers (devices to cool products and display them at the same time) critical for an impulse category; we have innovation in product and packaging design, merchandising and infrastructure,“ counters Anand.

“Mondelez shouldn't be pompous, but milk Cadbury for the next 30 years; it is better to lose a bit by promoting Cadbury rather than gain little by promoting a bit of different avatars of what was Kraft and now Mondelez,“ says Harish Bijoor, brand consultant and CEO of Harish Bijoor Consults.

But the unsettling change also creates opportunities for growth. “If Mondelez keeps innovating to creating opportunities to increase consumption and building a strong distribution and supply support, the going can certainly be good once the economy picks up. A completely new management ensures everyone can be easily on the same board with a similar mindset to take the strategy forward. It makes life a lot easier for Mondelez,“ sums up Alagh.

Kala Vijayraghavan ET140624