Strategies We Need to Implement After the Acquisition

Dear shareholders and employees of Kraft Foods,

I would like to talk about the strategies our company will implement after the takeover and potential problems we will face. I will break down the problems and provide solutions for them so everyone can see why it is important to support our CEO in her decision.

During the meeting with our CEO, Irene Rosenfeld, she called this takeover "truly a transformational combination”. Negotiations are still underway but if the takeover is successful, Kraft and Cadbury will take over past industry leaders Mars and Nestle and become the World’s largest chocolate and candy company. This is an industry status, which every company covets and this can be achieved by acquiring Cadbury.

One of the drawbacks of this acquisition is the backlash that we will face in the U.K market due to the prospect of having one of their most revered companies taken over by a U.S. food giant. There are also skeptics who question Kraft’s offer and criticized that we overpaid to consummate the deal. Our biggest shareholder, Warren Buffett, had urged our CEO not to raise her initial offer of USD$ 17 billion.

A marketing strategy will need to be devised after the acquisition. Our CEO will need to be cautious not alter employment in the U.K as employees are protected by unions. Any uprising will harm Kraft’s image and may decrease sales.

Our CEO had made her intentions clear when she vowed to “preserve Cadbury’s proud heritage and traditions” by increasing the capital inflows into its brands and to retain “a strong presence” in the U.K.

One of the most significant things our company has done in the last two years is to decentralize our organization so local managers can gain more authority to make the decisions affecting their local markets. The same strategy will be applied to Cadbury so the U.K operations need not worry about Kraft’s interference after the acquisition. U.K markets will be analyzed and managed by U.K managers and Kraft will merely finance its operations.

Cadbury and Kraft can also mutually use their international networks to advance together. For example, Cadbury is more popular in India, Turkey, and South Africa. This can help reform our business in Mexico. On the other hand, Kraft can also promote Cadbury’s sales in Brazil, Russia and China, where we have a more dominant market share.

Integrating Kraft and Cadbury into convenience stores and gas stations are also opportunities we need to venture into. Sales in these small stores are growing despite its high price (compared to supermarkets) as consumers prioritize convenience; this leads to higher profit for both brands

Additionally, combining operations of both companies will save about $675 million annually by eliminating duplication in operations, administration and marketing. Kraft will expects earnings to grow in 2011 while maintaining our dividends and investment-grade debt ratio. Research done by Moody’s Investors Service has concluded that our company can stay investment grade if we are committed to reducing our debt.

Our company has bough and sold brands 19 times since 2007. These include the sale of our frozen pizza to Nestle in January, Balance bar to private investors in November 2009 and Post Cereals to Ralcorp in 2007. The timing or pricing of many of these deals is not optimal thus our company has made the decisions after thorough considerations.

The Cadbury acquisition would undoubtedly be the most expensive deal and the biggest company Kraft has ever acquired. Acquiring and selling brands however, is a common practice in our industry and we should not be skeptical due to its magnitude. As a result of the size and scope of this acquisition, other confectioners will be left to wonder if they need to make deals to catch up.

This acquisition is not only an opportunity to advance our company forward, but also a competitive advantage we will have over other companies within this industry. The economies of scale after the consummation of this acquisition is just too good to pass up.

Yours Sincerely,

Dolly Chia

VP of Marketing.