Goo dares wins….and the end for All Saints?

April 27, 2011

The Retail Inspector – High-Street-2

That’s the slogan for Cadbury’s Cream Eggs, an obvious big hit over Easter – but has the daring gamble of incorporating Cadbury’s into its brand paid off for American confectionary giant Kraft Foods?

In 1824, at just 22 years old, Mr John Cadbury opens up his shop on Birmingham’s exclusive Bull Street. Refusing to sell alcohol he instead sells tea, coffee, and most importantly, cocoa and drinking chocolate.

Fast-forward 179 years to 2003 and Cadbury’s is the world’s number one confectionary company. Some seven years later it’s sold to American food goliaths, Kraft Foods, in an £11.5bn deal.

Shareholders in Kraft Foods however, are still left scratching their heads as to whether the deal was worth it or not.

Every Easter Cadbury’s make a decent enough profit through sales of chocolate eggs, there’s a 50pc chance that the egg you’re eating was made by them and Easter sales helped drive a 3.5pc rise in sales at Kraft in 2010. But as a whole, Cadbury’s aren’t doing as well as Kraft would have liked.

Kraft’s net profits fell 24pc to $540m (£330m) in the last three months of 2010, on the cost of incorporating the Cadbury’s brand into its business. The unsatisfactory performance was also due to Cadbury’s disappointing 2.2pc rise in like-for-like sales in the quarter, slower than the original Kraft business which grew by 6.5pc and quite far off the 5pc sales growth that Cadbury boasted in 2009, its final year as an independent company.

Analysts at JPMorgan have recently advised that investors no longer buy shares in Kraft, because of its slothful performance in its home market of North America and at Cadbury.

Cadbury’s did however contribute more than four-fifths of the 30pc rise in Kraft’s sales in the final quarter of last year, despite its poor performance. Most analysts are saying it’s too early to label the acquisition of Cadbury’s to be a flop.

Kraft’s biggest shareholder, Warren Buffett, called the takeover “dumb” and cut his 9pc stake to 6pc as a result.

In other news…

It could be curtains for fashion retailer All Saints, as they have been issued a warning; complete a rescue buy-out deal by Tuesday evening, or the administrators will come in Wednesday morning.

It’s a scary warning, but a necessary one. Lloyds, which has lent £28.5m to the retailer is believed to have asked accountancy firm KPMG to be on standby to initiate administration procedures as early as Wednesday morning.

The most probable buyer will be US private equity firm Goode Partners, who, if the deal is done, will share control of All Saints with Mr Stanford.

So, the next few days could be pivotal for the high-end, high-street brand, watch this space…