The document discusses the implications of the merger between H.J Heinz Company and Kraft Foods Group. Some key points: 1. The merger creates a large food conglomerate that could dominate the food industry in Nigeria and negatively impact local competitors and consumers. 2. The new company may cut costs by reducing jobs, closing factories, and increasing food prices, negatively affecting employees and consumers. 3. The Nigerian government should strengthen consumer protection laws and ensure the merged company continues to meet quality standards and contribute to the Nigerian economy.

1. 0
UNIVERSITY OF LAGOS
Akoka-Yaba, Lagos
A PAPER ON:
H.J HEINZ CO. & KRAFT FOODS GROUP MERGER; THE IMPLICATIONS ON
CADBURY NIG. PLC AND MARKETING IMPLICATIONS FOR CONSUMERS IN
NIGERIA.
(BUS 841)
BY
AFOBUNOR AFORFEM
MATRIC NO. 149023159
DEPARTMENT OF BUSINESS ADMINISTRATION (MSC. MARKETING)
Lecturer:
Dr. ONIKU AYO
28th APRIL, 2015.

2. 1
Merger is an allied combination of two or more self-sustaining business corporations into a single
venture, usually the immersion of one or more firms by a dominant one. A merger may be successful
by a company securing the other's assets with cash or its securities or by purchasing the other's shares
or stock or by issuing its stock to the other company’s stockholders in exchange for their shares in the
acquired company (thus acquiring the other company's assets and liabilities).
There are different types of mergers and they include:
1. Horizontal, if both firms produce the same good or service for the same market
2. Market-extensional, if the merged firms produce the same commodity or service for different
markets.
3. Vertical, if a firm acquires either a supplier or a customer. If the merged business is not related
to that of the acquiring firm, the new corporation is called a conglomerate.
The reasons for mergers are numerous. The acquiring company may aim to eliminate a competitor, to
gain cost leadership by being more efficient, for diversification of goods, services, and markets, or to
reduce its taxes.
For the purpose of this study, I will infer that Heinz and Kraft’s merger is a Market extensional and
therefore has both positive and negative implications on Cadbury in Nigeria as well as marketing
implications to Nigerian consumers.
HEINZ AND KRAFT MERGER
Heinz and Kraft Company are both in the food business industry. While the latter is into food
manufacturing and the former into food processing. Consequently this makes both mergers a great one.
These are multinational brands taking their root from the United States and finding their way into
several countries in the World. 60% of Heinz sales globally come from outside North America and
98% of Kraft sales majorly from North America.
Consequently, this will provide an opportunity to sell Kraft’s brands in the international market as well
as boost revenue growth of the new firm.

3. 2
The H.J Heinz Company has ketchup and sauces line, meals and snacks line and infant/nutrition lines
which make up a total of 9 product lines and controls 60% of ketchup sales.
The Kraft Foods Company has a baking & desserts line, cheese & dairy line, coffee & beverages line,
deli meat, hot dogs & bacon line, sauces, condiments & dressings line, side dishes & meal helpers line
and snacks lines, which sum up to a total of 42 product lines and controls 80% of packaged macaroni
and cheese sales.
However, The Company’s core businesses are in beverage, cheese and dairy foods, snack foods,
confectionery, and convenience foods which make Kraft acquisition of Cadbury which is also a
confectionery company just perfect.
IMPLICATIONS OF THE MERGER ON CADBURY IN NIGERIA
Following the $14 Billion take-over of Cadbury by Kraft, there are a lot of changes expected
especially in the areas that has to do with the socio-economic impact on the business as well as
partners, Increased profitability for shareholders, management turnover rate might be on the increase
following 3G capital which owns Heinz looming history of slicing jobs in the name of greater
shareholders profit, an example was during the acquisition of Heinz, it slashed 600 jobs around North
America. Among other dynamics that are likely to ensue in the course of the company’s operating
years.
The merger could also be an opportunity to existing shareholders, members of staffs and consumers
too because both companies are global food giants and can explore each other’s innovative
competencies including technology and distribution channels or a mix of these to deliver a more
superior offering and or products in the food manufacturing business in Nigeria against that of
competitors.
The merger can further help in corporate restructuring and easy access to key value-adding activities
prior to the old ways of outsourcing to external suppliers and partners. However, restructuring with the
new management can give rise to a series of complex changes within the firm that may result in
internal investments in the development of new skills and capabilities. This may cause an indecent
haste to cut jobs.
Looking at the merger from a psychological angle, research has shown that mergers and acquisition
though continued to exercise a more immediate and seductive appeal to organisations than a reliance
on economic growth alone, has its risk on mental health. In a study of middle level managers involved
in the merger of two U.K Building Societies, Post-merger measures of mental health suggest merger to

4. 3
be a stressful life event, even when there is a high degree of cultural compatibility between the
partnering organizations.
Apart from the economics, finance, strategy, and human resources implication of the merger on
Cadbury there are a whole lot of complex events to consider in the post-merger which describes how
synergy can be realised by both firms during the organisational integration process, and the lack of
employee resistance to the combined entity.
Consequently, the success of the merger is a function of the similarity and complementarity of the two
merging businesses, the lack of employee resistance, the production and marketing complementarities
between Cadbury and Kraft, and the last but not the least, both companies sticking to the legal
agreements that has brought them together in the first place.
In addition, changes to the operations strategy can also contribute to cost savings. These could be
targeted at reducing headcount, shutting down less efficient manufacturing facilities and implementing
zero-based budgeting. Zero-based budgeting means that the managers have to explain every forecast
expense for the year from scratch, without appealing to previous years’ trends. This helps the top
management enforce a more stringent form of cost control and realize cost savings.
Since the chairman, Alex Behring at the new company will be the same as that which implemented
drastic cost cutting measures at Heinz, including a reduction in force of 4%, closing several factories
and grounding corporate jets, there is reason to believe that the projected changes to the combined
company’s operations strategy would be successfully implemented. The ability of the combined
company to refinance Heinz’s high-yielding debt. Since Kraft has a much better credit rating, the
combined entity will be able to replace such debt with low yielding, investment grade debt. This will
further reduce the Total Cost of capital for the combined company.
THE MARKETING IMPLICATION FOR CONSUMERS IN NIGERIA
Marketing is the performance of business activities which directs the flow of goods and services from
producers to consumers. Hence, the marketing implication of the Heinz Kraft company on the Nigerian
market.
The combination of these two food giants will have a far reaching impact on consumers. There are a
number of food processing and manufacturing companies in Nigeria competing for retail shelf spaces.
The competition will be heightened but from previous analysis many companies may not stand a
chance to compete favourably.

5. 4
For consumers, this may likely mean less competition to lower prices, which makes it even more
difficult for consumers to have a competitive market for food.
Consumers may also be forced to bear the brunt of the new company wanting to protect their profit
margins from the incessant demands of giant retailers; the commodity/goods could be priced higher as
the food company work closely with the supermarket or shelf space owners to extract money from
consumers.
For consumers who like shopping, this merger will further narrow consumer options in retail shelves,
while “consumers think they’re making choice’, whereas they are not. Because it will imply that most
of their choices are sold by the same company, manufactured by the same plant and just bear different
labels.
In addition monopoly will find its way to the food and beverages industry in Nigeria and is likely
going to kill our local firms based on the economies of scale and international growth of the Heinz
Kraft Company.
RECOMMENDATIONS
From analysing the trends and impacts merger has on the future of an industry these are my
recommendations;
 The Nigerian government should take the opportunity to review its consumer protection act and
stand by it. Thereby making it actionable.
 The Standard Organisation of Nigeria (S.O.N) should live up to its expectation, ensuring that
the new company provides Nigerians with the best of its products, with the same standard as
our counterparts overseas.
 The Nigerian government should ensure that the indigenisation policy is strictly adhered to in
all the Heinz Kraft company management and operations in Nigeria.

6. 5
 The federal government of Nigeria should review her fiscal policy and enact laws to protect our
local firms against big mergers such as this, so that they compete favourably in the same
industry.
REFRENCE
www.forbes.com
www.times.com