Monday morning we all woke up the news that Kraft Foods had made a £10bn bid for Cadbury, a bid which Cadbury quickly rejected the offer as it ‘undervalues the company’. Who says no to a takeover bid with a 31% premium on top of share price? – A brand which knows it can get a lot more.

Cadbury is the world’s second largest confectionery company with a stronghold in Britain and emerging markets which account for over one-third of the company’s revenue. Kraft is strong in markets such as Scandinavia and Brazil, where Cadbury has small presence.

Kraft is looking to use Cadbury’s strong brand presence in Britain and its positioning in emerging markets to create ‘a global powerhouse in snacks, confectionery and quick meals’.

I am not suggesting that a strong brand name is all a business should be about, but Cadbury’s decision to decline the Kraft bid had a lot to do with the strong brand Cadbury has created through innovative ad campaigns. We all know building a brand / brand equity requires huge investment and a long term commitment (not to mention a lot of creativity and market intelligence) and unfortunately the performance and return are never as easy to measure as they are with a direct response campaign. In the last couple of years, Cadbury has grown their brand through brilliantly planned and executed campaigns such as the ‘Gorilla’ and ‘Trucks’ spots – campaigns so persuasive we all forgot about the huge Cadbury product recall in June 2006. This means that, if they were to purchase Cadbury, Kraft would be able to focus on growing sales in Cadbury’s existing markets rather than their current conundrum – how to build Kraft’s own brands to be more personal and meaningful.

Kraft executive Michael Osanloo suggested that Cadbury was only worth what someone was willing to pay for it – as the world’s second largest confectionary company with average 12% growth per annum in emerging markets and a strong brand identity Cadbury doesn’t have to sell. Whether Kraft decides to put in a new (higher) bid or Hershey’s and Nestlé propose a counter offer, Cadbury is in the fortunate position of choosing when to sell.  Osanloo would perhaps have been closer to the mark then if he had said that Cadbury is only worth what someone is willing to pay when (and if) it actually decides to sell.