Saturday Profile: Man who can milk Cadbury's bidders

Published on Friday 11 September 2009 21:35

A FORMER tennis pro, Todd Stitzer is used to knocking back some unexpected volleys.

So when US food giant Kraft surprised the markets with a 10 billion-plus bid for Cadbury this week, it was little surprise that the chief executive of Britain's favourite confectionery brand forced Kraft back to the baseline. Stitzer, an ambitious, Ivy League-educated American, had no difficulty fending off his fellow countrymen, saying the 745p cash and shares bid "fundamentally" undervalued the business.

When Stitzer climbed into the Cadbury driving seat in May 2003, his appointment created considerable market chatter about whether it was appropriate for an American to head such a quintessentially British brand. Until his arrival, the chief executive's job had always been reserved for well-mannered old Etonians with an appreciation for the company's traditions.

Although the native of New Jersey had been with Cadbury for 20 years, some of the company's more traditional shareholders and employees were quietly concerned about where this former mergers and acquisitions (M&A) lawyer, who previously worked for the prestigious New York law firm Lord Day & Lord, would take the company.

First impressions were not helped when, six months into the role, Stitzer announced plans to axe 5,500 jobs and close 26 factories in Cadbury's biggest shake-up for decades.

The cuts, part of a four-year "growth" strategy, fitted ill with the company's paternalistic and socially aware reputation, which had been embedded in its culture since its Quaker owners built quality housing and leisure facilities for factory workers in Bournville in the late 1800s.

Stitzer's style also took some getting used to. A typical American lawyer, his wordy, jargon-filled deliberations were often attacked by commentators in the early days of his tenure – an interviewer once called him "as stiff as the Tin Man after a prolonged shower".

But the City has since warmed to this clean-cut 57-year-old and has even grown fond of the corporate speak, which Stitzer has refused to tone down. "That hasn't changed but the City audience doesn't mind as long as the job gets done," says Jeremy Batstone-Carr, head of private client research at Charles Stanley, the stockbroker. "He's now regarded quite highly in the City and has begun the process of turning the company around, which always goes down well."

As the Square Mile gears up for one of the most exciting pieces of corporate action since the collapse of Lehman Brothers last year, analysts are placing a lot of confidence in Stitzer's forehand. It takes a lot of chutzpah to stand up to a behemoth such as Kraft, but analysts say that if there's one man who can turn the game Cadbury's way, it's Stitzer.

He has fought more than his fair share of battles at Cadbury, which he joined in 1983 as assistant general counsel after his wife told him to find a way out of corporate law and pursue a "more balanced style of life".

He has provoked the fiery wrath of trade unions more than once with his turn-around plans, cutting 7,800 jobs – 15 per cent of Cadbury's total – in July 2007.

He has also had to fend off an intimidating attack from US activist shareholder, Nelson Peltz. In December 2007, Peltz wrote a letter to Cadbury board members warning that if management did not radically improve profitability, he would lead calls for their heads.

He warned that the credibility of Stitzer and other members of the management team was "very low".

Some chief executives might have taken the attack personally but Stitzer kept his calm, responding rationally to criticism that growth targets were unambitious.

He pressed ahead with long-rumoured plans to spin-off Cadbury Schweppes' US drinks business, which included well-known brands such as Dr Pepper and Snapple.

Although there were doubts as the US sub-prime crisis unfolded about whether the ambitious de-merger could go ahead, the City and shareholders gave Stitzer their vote of confidence.

Before the demerger, when Cadbury Schweppes was renamed Cadbury plc, the business was seen as too unwieldy. In May 2008, the drinks operation was floated on the New York Stock Exchange as Dr Pepper Snapple Group in the first demerger of a British business for more than a decade.

"For a long time Cadbury wandered through life with an outstanding portfolio of brands and an incredible history, but no great desire to sweat the assets," says Batstone-Carr. "Now there has been a transformation in that approach."

Analysts say Cadbury's growth figures have since been more encouraging. In July, at the time of its first-half results, Stitzer said profits for the financial year were likely to beat market expectations as the company found itself among the unexpected beneficiaries of the recession. Depressed, cash-starved Brits have turned to favourites such as Dairy Milk and the recently re-launched Wispa for comfort, leading to a 12 per cent surge in first-half revenues.

Warren Ackerman of Evolution Securities argues that Stitzer's turnaround job may encourage others to rival Kraft's bid. There is speculation that Nestl and Hershey may hijack the game. There are also high expectations that Kraft will return to the court with a significantly improved offer.

Charles Stanley points out that Cadbury has a significant number of US shareholders, who will share none of the employees' and unions' concerns about the company falling into foreign hands. The broker says they may be persuaded to sell at 830p to 850p a share – Kraft is offering 745p.

Whatever the outcome, analysts argue that shareholders can rely upon Stitzer to secure them a good deal. As one analyst said: "He'll be able to put his training as an M&A lawyer to good use."

THE LAWYER CHOCOLATE CHIEF

TODD Stitzer was educated at Ridgewood school in New Jersey before reading law at Harvard University.

He worked as a part-time tennis coach to fund his studies and in 1978 was offered a job with the prestigious New York law firm Lord, Day & Lord. Stitzer was quickly identified as a rising star at the practice, where he specialised in mergers and acquisitions.

It was here that be became familiar with Cadbury as his partner at the firm worked on the confectionery giant's account. In 1983 Stitzer entered the business world, joining Cadbury as assistant general counsel (US). He later became group development director, then chief operating officer before his appointment as chief executive in May 2003.

The 57-year-old is married and has two children. He lives in Surrey.