Mondelez chewing gum leaves bitter taste in Southern Africa

Roman Grynberg | Friday August 29, 2014 15:32

 

But in 2010 the UK food giant Cadbury was eaten by an even bigger fish, the American firm, Kraft  Foods. Kraft had in turn been acquired by the US tobacco giant Philip Morris in 1988. With this rather unfortunate direct ownership of Kraft, a food producer by a very big tobacco giant it was time for basic rebranding to make sure that the company’s chocolate consumers were as a far away  as possible from the foul smell of Philip Morris cigarettes  and its many tobacco litigation cases in the USA. Following the merger with Cadbury, Kraft split off its global snacking business and  rebranded and renamed it  in 2012 as ‘Mondelez’- meaning ‘delicious world’ in French.

There was something very British, almost colonial about the structure of Cadbury in Southern Africa, having plants producing specialized products in four of the five SACU countries. Specialty chocolates were made in Namibia, chewing gum in Botswana, Bubble gum and candy in Swaziland and in South Africa chocolate products (with most of the 900 jobs) in Port Elizabeth,  South Africa.

When Kraft took over in 2010, Cadbury could still be seen as an example of what SACU could be – a region where all the countries benefited from the customs union and its industrial development potential and not just South Africa which normally gained all the economic benefits of industrial development and in return handed out a fat cheque every year to the treasury of other SACU members as compensation.

This cosy arrangement may have worked well for Cadbury but a giant like Mondelez International with global sales of USD 35 billion in 2013, controlling 15% of the world’s confectionary market and operating in global value chains,  a rationalization of its many African operations was inevitable. Mondelez International was going to have none of this Cadbury model  and so Mondelēz International has confirmed that its factory in Gaborone will close at Christmas  with the loss of 134 jobs and the Namibian facility has also been shut with the loss of 28 jobs.

So who will become the new chewing capital of Africa- you guessed it the jobs are going to South Africa ...and to Europe, probably Mondelēz International’s facility in Poland. Mondelez South Africa spokesperson Navisha Bechan-Sewkuran explained the move in the following way: ‘Mondelēz International has decided to focus its resources on scale manufacturing facilities where it can generate greater efficiencies, to reinvest in growth.

Demand for pellet gum produced in Botswana has dropped over the last period as there has been a shift in the gum consumer market preference towards slab gum. Based on careful consideration of the future viability of Cadbury Botswana, Mondelēz International is announcing its intent to cease manufacturing in Botswana.’ For Botswana’s struggling manufacturing sector, already reeling from closures of its textile and garment plants in the last few years this is no small body blow.

Chewing gum had become one of the nation’s largest manufactured exports in 2011 valued at P157 million  and ranked as the 11th biggest export, only slightly behind our exports of chilled beef. At present workers and management are negotiating a redundancy package so that Christmas for the unemployed Mondelez workers in Gaborone will not be as bitter as it might otherwise be.

This outcome should by no means be a shock to anyone who understands global value chains and even though it will be no recompense to workers at the Gaborone plant  and the 1,000 or so dependents who rely on it for income, there was no way that a small plant producing relatively small volumes of chewing gum was going to survive inside a giant like Mondelez International.

The supply through one point in Africa i.e. Port Elizabeth was a result that was predictable and production throughout the continent will almost certainly be limited. At the time Cadbury was acquired by Kraft in 2010 it had operations in 10 African countries and this was largely as a result of the very high tariffs that most African countries had in place on imported confectionary.

But globalisation and liberalisation of trade in Africa have lowered these tariffs and now, as part of that ‘sweet harvest’  it will get much cheaper chewing gum from its huge Mondelez International and South African operations as a result.  Whether these savings will be passed on to consumers is quite another matter. 

These are the views of Professor Roman Grynberg and not necessarily those of any institution with which he may be affiliated.