What is Cadbury really up to?

During the past few weeks the news has been full of stories about Cadbury shedding jobs in all three of its Australian and New Zealand chocolate factories. This fact seemed to overwhelm the concurrent news that Cadbury is proposing to invest AU$135 million to improve the efficiency and productivity of all three sites.

I spoke with Cadbury’s managing director, Mark Callaghan, to find out what the company is really up to. His revelations reveal a valuable insight into how Cadbury has developed its restructure plan and provides food for thought for all food manufacturers in Australia and New Zealand.

Cadbury is intrinsically connected to the local communities around its three sites, having had a manufacturing presence in them for almost 100 years. The company was acutely conscious that if it pulled out of these sites the communities and people would be devastated and the brand name seriously tarnished.

However, manufacturing is now a global activity and Cadbury realised that to keep going without change was really signing a slow-death warrant. So it started looking very closely at its manufacturing from a global manufacturing and marketing perspective.

Both Australia and New Zealand are first-world countries so neither has access to cheap labour and the geographic isolation of the countries eliminates any proximity to global markets so neither of these points was a raison d’être.

In a third major criterion — access to raw materials — both countries came up trumps. Both have world-class dairy industries and so Cadbury has access to one of its principal raw ingredients, milk, in quantity, quality and at a competitive price.

Being able to justify manufacturing in Australia and New Zealand, Cadbury now had to look at its plants. It saw ageing facilities with manufacturing of product types duplicated or even triplicated across the sites.

In Dunedin, for example, Cadbury currently manufactures 32 different technology types and hundreds of different products from Easter eggs to drinking chocolate. There is no way it can do this efficiently.

The old adage 'jack-of-all-trades and master of none' summed up Cadbury’s position. The company recognised it would have to reduce complexity, reduce duplication, increase capacity (to give advantages of scale) and increase efficiency if it was to make its plants viable in the long term.

Cadbury then looked very closely at each factory. Should each one continue to exist or should the company put all its Easter eggs into the one basket? The old model of single country supply was clearly outdated in the global economy.

Many of Cadbury’s competitors source their products from plants that make the product for the whole world in a single plant. Thinking along these lines, Cadbury decided to structure its factories on an ‘advantaged capabilities’ model.

The result is simple. Cadbury is proposing to make each of its sites a ‘Centre of Excellence’. In Australia, Claremont will specialise in producing moulded chocolate blocks and Ringwood chocolate bars, while in NZ, Dunedin will focus on manufacturing boxed assortments.

This specialisation will bring the economies of scale to each site and justify the upgrading of a chocolate moulding plant for Claremont and boxing machinery for Dunedin. All plants will benefit by automating their packaging systems. Expertise in the different technologies will be concentrated at the sites, further facilitating the company’s strive for excellence.

Mark Callaghan hopes that five to six years of commitment to this investment and restructuring will secure the future of all three sites. Callaghan emphasised how important its employees are to Cadbury. The company is currently working through a consultation process, asking employees to provide feedback on its plans and contribute ideas.

This is a win for food manufacturing in Australia and New Zealand. Other neighbouring countries in the region have offered Cadbury 10-year tax breaks, funding and greenfield sites but the company is electing to stay in Australia and New Zealand.

The New Zealand government has been supportive of both Cadbury and its staff and Callaghan especially commented on the NZ government involvement in the creation of the research and development facility in Dunedin. In Australia, the state and federal governments have offered assistance to those who will lose their jobs, for which Callaghan was grateful.

I have to wonder if in supporting those who lose their jobs the Australian government isn’t shutting the gate after the horse has bolted. There is a lot of support given to other sectors of the Australian manufacturing industry, particularly the automotive industry, but little to the food and beverage sector.

So — what is Cadbury really up to? It is planning for the long term. The company wants to be a major player in the global chocolate and confectionery market and knows this is only possible if it is ‘great’ at what it does.

Creating centres of excellence will give its sites the advantages of scale so state-of-the-art technology and automation can be cost-effectively implemented and the company can compete on the global stage with ‘great’ products manufactured in the antipodes.