Mondelez International for its plan to close the Dunedin factory by March next year, with the loss of 362 jobs. Photo: ODT files

There is no chance of the Cadbury factory being saved from closure after owner Mondelez made its decision, long-time confectionery maker Nat Craig says.

Mondelez would ship to Australia any of the plant it wanted and cut up the rest rather than sell to a competitor, he said yesterday.

Mr Craig, of Dunedin, said the decision to close the Dunedin manufacturing operation raised some interesting questions regarding the decision-making processes occurring within large multinational corporations.

The fact the Dunedin operation was "ticking along'' as a lean and efficient organisation had no bearing on the decision to close.

Cadbury could choose to close what factories it wished without the need to provide adequate justification, he said

"However, providing justifications that do not stand up to scrutiny raises the question of what is really behind this decision. The decision took place behind the boardroom doors of a large multinational company where company politics sometimes overrides financial rationale.''

While it would be interesting to know who made the final decision to close Cadbury, in Dunedin, it was likely that information would never be revealed, he said.

Mr Craig became involved in the confectionery industry with the acquisition of the Regina Confectionery operation, in Oamaru, from a receiver in 1988.

After a successful restructuring and significant growth, the business was bought by Nestle, which, like Cadbury, later decided to close it and relocate the operation to Australia - for similar reasons as stated by Cadbury.

A legal oversight by Nestle management resulted in the equipment being bought by a New Zealand company, Rainbow, and re-established on the Oamaru site where it was still successful more than 20 years later.

It remained one of New Zealand's only remaining sizeable sugar confectionery manufacturers.

The remainder, including Cadbury's sugar confectionery operations, had been moved offshore, mainly to Australia.

Mr Craig is involved with a chocolate manufacturer in Hamilton, Waikato Valley Chocolates Ltd, which is moving into a new purpose-built factory.

This company was formed almost 24 years ago as a joint venture between The Warehouse and three executives from the old Regina operation, including Mr Craig.

It was formed because the multinational suppliers, in particular Cadbury, would not provide The Warehouse with the product range and pricing structure it required for New Zealand domestic consumers.

"This company is now the largest supplier of Easter products in New Zealand, after Cadbury, and supplies a range of other chocolate products through The Warehouse.''

Waikato Valley Chocolates and Whittakers were the only sizeable chocolate manufacturers remaining in New Zealand, he said.

There were numerous small niche and hand-craft suppliers, but not "fast-moving consumer goods'' chocolate suppliers.

With the closure of the Dunedin factory, all Cadbury Easter products would now be imported.

Mr Craig had also been involved in confectionery manufacturing and marketing operations in China, Australia and other parts of the world.

He understood the costs of doing business in Australia, he said.

Based on his experience, he had some observations about the Cadbury operation in the city.

The Cadbury Dunedin operation was included as part of a major strategic review of the global manufacturing operations, just prior to the Kraft takeover. At that time, numerous manufacturing operations were closed and others rationalised. Dunedin was chosen as one to remain and investment was made into improving it for the long term.

After its global rationalisation, Cadbury became the target of a hostile takeover by Kraft Foods (now named Mondelez International) in 2010, which was successful. Kraft Foods then merged with the Heinz company in 2015, making it the fifth-largest food and beverage company in the world.

What appeared to have happened since Cadbury's global review, which saw Dunedin maintained as a manufacturing area of excellence, and now was a change in control and the takeover and merger by multinational giants, Mr Craig said.

Cadbury maintained and invested in Dunedin's operation because it identified a number of advantages to being here. Those advantages included a cost-effective manufacturing base, highly skilled workforce, efficient port and transportation hub, direct supply of raw materials such as milk, to name some.

The cost structure of manufacturing in Australia is significantly higher than in Dunedin with labour costs considerably higher, efficiencies generally lower and compliance costs greater.

Cadbury's chief executive was quoted in the media as stating one of the reasons for the closure was 70% of Dunedin's production was shipped to Australia, across one of the most expensive waterways in the world, he said.

That cost would have been taken into account when the analysis was undertaken of which product lines should remain in Dunedin and the cost had not significantly changed.

More importantly, freight was a small cost component relative to the value of their product being shipped. The products Cadbury now proposed shipping back to New Zealand included all its Easter egg range which, being hollow products, had a far higher freight cost to sales value ratio.

"For high value consumer products, being manufactured in a cost-effective and efficient base such as Dunedin, this argument around freight costs does not stand up to scrutiny.''



