Thursday, April 15, 2010

Dear Managers,
As VP of Production, I must inform you of the nature of chocolate production. Chocolate production's most valuable asset is time. The cocoa seeds that are used to make chocolate are usually ground and then fermented for a period of several weeks before being put through the rest of the process. Chocolate must be monitored carefully and by hand for years before cacaosees can be sent to factories to be processed into chocolate. Thus this will create high costs in producing these seeds. And the best cacao comes from South America, which as seen recent economic and political downturn which could increase the price and mke it harder for us to procure cacao.Furthermore, the cacao needs to to sorted, rooasted and crushed by great machines that liquefy it into paste at highly specific temperatures. These production costs range from $2-$3 milllion dollars per month.
Fortunately, Cadbury has longstanding relationships with many cacao farmers, which we can take advantage of. But the element of cost and time are still crucial factors. Can Kraft food afford to wait months to launch new chocolate products, and how will our marketing strategy ensure its success? True, the market for chocolate is growing, but in terms of production costs, I don't believe Kraft will be able to spend another $2 million or $3 million dollars on chocolate production per month without significant layoffs in personnel or cutbacks in other products. These could have significant effect on our production track. Thus I would think twice before acquiring Cadbury.


Sambaran Chatterjee
VP of Production

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