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Is Keynsham the graveyard of Kraft's reputation?

Dave Harvey | 20:17 UK time, Tuesday, 16 March 2010

You can build a reputation in a hundred years," the American executive told MPs, "but lose it in a second."

Chocolate wars

Marc Firestone, Vice-President of Kraft Foods, said many other things to Parliament's Select Committee on Business this morning. And the MPs made their own feelings thoroughly clear too. But this was the nub of it. Kraft, the world's second largest food corporation, has put the small town of Keynsham well and truly on the global corporate map.

Kraft's decision to close the Somerdale chocolate factory will cost 400 people their jobs. "It was like being sacked again," Andy Nicholls told me. Mr Nicholls is the senior shop steward in the plant for Unite, the union, and he expresses well how gutted people felt. "We were used, plain and simple. And Kraft are despicable for it."

But this is now about far more than 400 jobs and 75 years of chocolate-coated history.

"You [Kraft] were either mendacious, cynical or utterly incompetent." That's how the Conservative Chairman of the Committee, Peter Luff MP, kicked off the session on Somerdale. Lindsay Hoyle MP compared the Americans to Vikings: "You came to York and pillaged the town of its chocolate factory," in a reference to Kraft's takeover of Terry's, whose chocolate oranges are now made in Poland.

So did Kraft plan the closure from the start? Did they always intend to reverse their now infamous pledge to save Somerdale? Did they, in the words of Kingswood's MP Roger Berry, simply con the people of Keynsham to sweeten the bid?

Somerdale, in Keynsham, is due to close by the end of 2010

Most people here have already made their minds up. Browse this blog, and others on this topic, and the cynicism shines through. But before you decide, hear the case for the cock-up. Because that is the best Kraft can claim. An almighty failure of corporate intelligence.

"We had a perfectly rational plan," Mr Firestone tried to explain. A plan, he went on, that was not available to Cadbury. Simply put, Kraft faced rising demand for their European chocolate brands: Toblerone, Milka, and others. They reasoned that a new combined business could use the factory Cadbury was building in Poland to feed the growing European demand, and leave Keynsham to make Crunchies and Curly Wurlies for the UK.

Now I've been covering this story every step of the way, and this is the first time I've heard this argument, specifically put. And here's the vital bit.

"What we did not know," Mr Firestone went on, "was that Cadbury were investing in parallel plant in Poland. Tens of millions of dollars was going on specific equipment that could only make Cadbury products."

He claims that when the deal went through, Kraft execs discovered to their horror that the Polish plant could only make Curly Wurlies and Crunchies and Mini-Eggs. If they used its capacity, Keynsham would have to be mothballed. And if they didn't, they would have to throw away specialist machinery worth tens of millions of dollars.

"We had a perfectly sound basis for our belief that we could continue to operate the Somerdale facility," the American concluded, "but we could not know what Cadbury had done in Poland."

Chocolate production in Keynsham

"You are claiming ignorance on a massive scale!" said Roger Berry, MP for Kingswood. Afterwards he told me he found Mr Firestone's case "stupefying. Either they knew, in which case that original pledge was a cynical ploy, or they didn't - in which case they were rash in the extreme to give it."

Now Mr Firestone is both a lawyer and a PR man, by his own admission. And this morning he had to balance his words very carefully. Time and again he stated the sincerity of the original pledge, and the surprise in his company when, in late January, they saw the Cadbury closure plans in detail. But he clearly failed to persuade the Committee.

Did Kraft knowingly mislead us all? "We'll never know," Roger Berry concluded. Or was there a massive failure of corporate intelligence in Illinois? Either way, the reputation of the world's second largest food company took a hammering today, broken over a bar of chocolate.

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