A cautionary tale of the sale of a family business

Brands and the family business...Cadbury's Creme Egg

Brands and the family business...Cadbury's Creme Egg

Here’s a tale about what can happen to a well-loved family business brand when it sells out to a big multinational. It involves the UK confectionery brand Cadbury, which for most of its more than 150 years in business was owned by the Cadbury family. That all changed in 2010 when the company was sold to the US food group Kraft, now known as Mondelez International.

Recently, it was disclosed by the UK-based Sunday Times that Cadbury, which makes popular chocolate brands like Creme Eggs and the Fruit & Nut bar, has paid no corporation tax in 2014 on is £140 million in profits that year. Mondelez took advantage of all perfectly legal structures to enable it to avoid paying the taxes.

In a statement, Mondelez said: “We comply with UK tax law and, as with all global businesses, pay tax based on the laws of the country we operate in. We have invested over £200 million into the future of our UK business over the past five years and we contribute £1.06 billion to the UK economy."

But that hasn’t stopped some people expressing their annoyance over the issue. UK politician Margaret Hodge, who chairs a government group on responsible tax, told the Sunday Times the Quakers who founded Cadbury in Birmingham in 1824 would be "turning in their graves".

She’s probably not too far off the mark with this sentiment. Sir Adrian Cadbury, one of the last family members involved with the business, said after the sale to Kraft: “A bidder can buy a business….What they cannot acquire is legitimacy over the character, values, experience and traditions on which that business was founded and flourished.”

Mondelez actions are a case of a company maximizing its shareholder value and this is what companies do - no disagreement with that. Nevertheless, once the sole begins to leave a business it is extremely difficult to get it back and the company will eventually wither along with its brands.

That is why Mondelez might be wise to take note of some of the wider stakeholder views on Cadbury if they aren’t one day to see the value of Cadbury for their shareholders diminish to something insignificant.