The chairman of Cadbury Schweppes has dismantled his inheritance and rebuilt it into a global multinational: little wonder then, says Andrew Davidson, that he is weary of the old 'paternalistic family firm' tag.
Sir Dominic Cadbury, long and lean with thick, greying hair, hooded eyes and a determined chin, can seem rather a serious man. You might, on first meeting, take him for an eminent physician or the headmaster of an earnestly academic school - there is about him just the right air of cautious asceticism and sage professionalism. All of which appears somewhat at odds with the fact that he is renowned as a marketing whiz and has headed Cadbury Schweppes, Britain's best-known chocolate maker and one of the country's biggest food and drink groups, for nearly 15 years, first as chief executive and then, since 1993, as chairman.
But it shouldn't jar, of course. Marketing is a deeply serious business and running chocolate factories, every child's dream, is a cut-throat trade even for the Cadburys these days. Dominic Cadbury, at 57 something of an elder statesman in UK business (head of the CBI's education and training affairs committee, president of the Chartered Institute of Marketing, chairman of the Economist group, ex-deputy chairman of Guinness), has worked hard to earn the plaudits. He is widely credited with transforming the family firm from a middling-size British business with good Commonwealth links into a truly global multinational, while never losing touch with its reputation for progressive and paternalistic ...
Cadbury frowns deeply. The sun is shining, the leaves are fresh on the plane trees outside, spring is about to make way for summer, and a little cloud has passed over his face. We had been chatting nicely, sitting in shirtsleeves in his elegant fourth-floor office at Cadbury Schweppes's swish headquarters overlooking Berkeley Square, talking about who does what at the company. And then I had mentioned the 'p' word. His eyes, magnified by round, steel-frame spectacles, seem to narrow slightly. 'Paternalistic.' He cannot stand it.
Excuse me. A Cadbury who balks at paternalism? Didn't his God-fearing Victorian forebears set up their chocolate factory at Bournville as a model for caring capitalism? Didn't their progressive values become so famous that the factory site now incorporates a large visitors' centre for tourists? Didn't ...
'The reason I frown,' he says, smiling tightly, 'is that it is often put to me that we have a paternalistic style of management, but that has not been the case at Bournville since well before I came into the company.
The idea of having a father/child relationship with the workforce may have been seen as progressive in the early part of the century but it's certainly not seen as progressive now, and I don't like the fact that people still have this idea of us. I got a question about it at the AGM last week, and it's often confused with this thing about us being a family company. We stopped being a family company a long time ago. Less than 1% of the shares in the company are in family hands. It's just that the image seems to hang around for a long time.'
It certainly does. When we met, in mid-May, Cadbury was sitting on some rather hostile headlines about a likely strike at Bournville over the company's attempts to change shift patterns. A strike at Cadbury's? He sighs. 'People seem to have the view that we have never had a strike at Cadbury's. It's just not true.' In fact so much has changed at Cadbury Schweppes over the past decade and a half that it is not surprising that public perception is panting to keep up. The company has virtually looped the loop in strategy terms. Old diversifications into food and hygiene products have been sold off. New interests in the fizzy drinks market have been bought in. Most importantly, first under Sir Adrian Cadbury, Dominic's elder brother who was chairman and managing director before him, and then under Dominic Cadbury himself, the emphasis at the company has gradually shifted from confectionery (1996 trading profit £267 million) to soft drinks (£445 million). Since the acquisition of Dr Pepper and Seven-Up in January 1995 for £1.6 billion, seen as the key moment in Cadbury's re-orientation of the company, Cadbury Schweppes has started chasing Coke and Pepsi in the global market with extraordinary audacity. No wonder British analysts get sweaty palms thinking about the risks to which quaint little Cadbury Schweppes is exposing itself.
No wonder, too, that Dominic Cadbury, who has spent much of his life being beaten over the head about his ancestors' Quaker quirks, is weary of the old 'paternalistic family firm' tag. It grates with everything he has set out to achieve.
He is an intriguing man. An Old Etonian from a famous family who has dismantled and then rebuilt his inheritance, a ruthless manager who has surprised many with the single-mindedness of his determination, a natural conservative who likes his shooting and his golf and his houses in Knightsbridge and the Cotswolds, yet has shrewdly removed most of the ammunition that his enemies could use against him. He realised early on in business, he says, that he had to 'de-Etonise' himself if he wasn't going to get people's backs up, and to work harder and better if he was going to refute the taunts of nepotism. Both he and his brother also made sure Cadbury family ownership in the company was diluted to virtually nothing, and that people noticed. When the first Sunday Times Richest 500 list included them (attributing to the family shares it didn't own), Adrian Cadbury insisted that they were de-listed. Nearly everyone in the City now agrees that the Cadburys have earned their success through merit, not by any family connections.
Having your name on the chocolate bars probably still helps a bit, but there is more than one relative in the company who has never got to senior management.
Family ties can be an asset in other ways. Cadbury does admit that he owes a lot to his brother. It was Adrian who persuaded him to go to Stanford Business School in the US after he left Cambridge, better preparing him for his start at the family firm. And when they ended up working together, the elder Cadbury made sure their skills complemented each other well. 'Dominic has fantastic focus,' agrees Sir Adrian, 'he can always shut out the irrelevances.
I tend to be more interested in the analysis.' The 11-year age gap meant that their relationship was more father/son than fraternal, and the personal tragedies that have stalked the family - a brother killed in a motorbike accident, a sister killed in a plane crash, another brother, Jocelyn, the Conservative MP for Northfield, who committed suicide - have undoubtedly bonded them closer. Dominic Cadbury agrees that without that tight working relationship, it is possible that Cadbury Schweppes might have gone the way of so many other public companies with family connections, immersed in jealous backbiting and mutual recrimination.
Cadbury's extraordinary determination (for which he is renowned in business circles, whether in the boardroom or on the tennis court) was fostered at an early age. Born in 1940, he had already spent much of the war away from his parents by the time he was whisked off to boarding school at six. Add to that the fact that he was number five out of six children - 'you have to fight harder to make your voice heard' - and the key components of his character fall into place. Derek Williams, who was chief executive of Cadbury Schweppes's former joint venture, Coca Cola Schweppes Beverages (CCSB), says he thinks the Cadbury boss is driven partly by a sense of family duty, but also, like so many high achievers, by a real fear of failure. 'Especially,' he adds, 'failure with a Cadbury name on it.'
Yet the Cadbury heritage is very much a mixed bag. It was Dominic's grandfather, George Cadbury, who first built up the chocolate business, attempting in the process to better the lot of the working man by moving his factory out of Birmingham and onto the greenfield site of Bournville. That streak of Cadbury liberalism was continued by his son Laurence, Dominic's father, who ran two newspapers, the News Chronicle and London Star, which campaigned for social reform. Unfortunately the Cadburys were not as good at running newspapers as they were at making chocolate, and they eventually sold out. They were always a pragmatic family, however, and angered many liberals by selling to the right-wing Associated Newspapers. Nowadays the Cadburys are rather less liberal politically than their forebears, even if they still lay great store by the company's traditional 'values' (not including paternalism, of course).
The move out of media was a blow to the young Dominic who had set his heart on going into the newspaper business. Instead, he joined the confectionery arm - after a formal interview. By that time, in the mid-'60s, the business was at a crossroads. McKinsey had just conducted a major re-evaluation of the company. Co-incidentally Schweppes, then an independent company having a good run in the mixer business, had also called in the same consultants. When the two companies merged in 1969, says Cadbury, it reflected a lot of the work that McKinsey had done.
Both companies had struggling food divisions that could be put together, both wanted to diversify. However, the merger, says Cadbury, was an 'enormously difficult management task'. Not something he would recommend. He smiles faintly.
Only the week before we met he had resigned as deputy chairman of Guinness after the announcement of its merger with GrandMet. Could they learn from looking at the old Cadbury Schweppes merger? 'I think there is a message for them there,' he says cautiously, 'and I have already given that advice.
You cannot go about it as 'it's Joe's turn for this job and then Charlie's turn to have that one. It doesn't work. So and so chairman, so and so chief executive.' He shrugs. 'The advantage of a take-over is there is none of this messing.' Was he against the Guinness-GrandMet merger? No, he says, in combining the two there are some incredibly obvious savings to be made which you can balance against the problems.
And then use the savings to mop up some good-sized food and drink multinationals?
Already newspapers were speculating that Cadbury had resigned because the new vehicle might bid for Cadbury Schweppes. 'I don't see the new company coming up with us as a target,' he says sharply. 'I think they have said no to high-premium acquisitions, and anyway, the more you talk about the benefits of low-premium mergers the more you are raising doubts about the value of high-premium takeovers. Why pay a 40% premium to buy another company?' He throws up his hands to emphasise the point. Then he stops and adds with a grin: 'Well, in fact I'm sure I would ask for more than a 40% premium ...'
Yet mergers do strange things to strategy. At Cadbury Schweppes, for instance, he spent years unravelling everything the newly merged company tried to build up. Isn't that a bit ironic? 'Well, I suppose it is ironic that we are out of food now. I think the senior management were right to see what they could do in related fields but in the end it was never strong enough to sustain itself. And when they looked at diversifying, they went over the top, especially moving into health and hygiene.' By the time he became chief executive, he knew his long-term strategy. The business, he says, needed focus. 'We were so obviously spread out and not succeeding that you didn't need to be a rocket scientist to see what you had to do. The only danger is, once you start getting rid of things, where do you stop? Everyone said: why not sell off Schweppes as well?
But as soon as we got rid of jam, tea, coffee and Jeyes, and said this is called Cadbury and Schweppes, and let's get after these businesses, everyone saw the logic.'
Really? Surely people are still asking, what's the synergy between chocolate and fizzy drinks? Wouldn't the companies be better off apart? Cadbury frowns. 'Sure,' he says, 'we could split the companies and jack the share price up 50p for a few weeks, but you really have to say: how are you going to develop these businesses over a period of time? While the case for demerger should be on the table it is a bit flavour of the month at the moment. There are a lot of strengths in being together.'
Such as? He cites three examples: negotiating with banks for funding, setting up overseas subsidiaries where one stream is already operating, and recruitment, all of which are easier, the bigger you are. The trick is to make sure the centre does not get bogged down in bureaucracy. However, it is no coincidence that Cadbury Schweppes's chief executive, John Sunderland, recently told analysts that, from now on, management will be dedicated to growing shareholder value. Everyone at the company knows that demerger is an issue that will not go away.
Yet there is a steely resolve about Cadbury that, according to those who know him, always stands him in good stead in these kinds of situations.
So far, he has tended to get the big decisions right. Adrian Cadbury cites two instances in particular as good examples of his brother's vision and decisiveness: the switch from bottling Pepsi to opening the joint venture with Coke, CCSB, in the '80s. 'That was Dominic at his best, he grasped the nettle, it absolutely transformed our position in the UK drinks business. We became a major force.' And the decision to sell its stake in the joint venture for £621 million last year, when Coke was making noises about wanting to go it alone, was equally smart.
Cadbury Schweppes negotiated a 15-year bottling agreement with the company and got a windfall to put behind its brands. 'In both cases the thinking was absolutely right,' says Sir Adrian.
On a personal level, those who have worked with him say that he can be a very tough man to please - 'Dominic probably has the sharpest edge of anyone from the family,' says Sunderland. 'He is very hard on performance.' He is, however, a good listener, and encourages blunt speaking. One executive remembers telling him in the mid-'80s that the company's problem was that there were too many 'PSTs' (public school twits) as top directors, and not enough 'GSBs' (grammar school bastards). He thought he might have gone too far, but Cadbury simply took it in and within a couple of years the right changes had been made. (Apparently, Cadbury then asked what he was and was told: a 'PSB'.)
Yet colleagues are surprised at how adroitly he has made the transition to chairman after his tight control of the company as chief executive.
Cadbury himself says he found the transition difficult. 'I had withdrawal symptoms for six months. You know the business and all the people so well that it is very difficult to keep your nose out of things, especially appointments.' Sunderland is Cadbury's second chief executive, replacing David Wellings last year. He is the first chief executive of Cadbury Schweppes not to have run the chocolate business, an indication, perhaps, of the way company priorities are going.
Yet it is this shift, in particular Cadbury Schweppes's assault on Coke and Pepsi with brands like Dr Pepper and Crush, which has made some query Dominic Cadbury's long-term game plan. These doubts, specifically about how Cadbury Schweppes is going to get its products onto shelves overseas, have held down the company's share price (around 550p at the end of May), which looks tiny in comparison to those of its giant American rivals (Coca-Cola boasts a market capitalisation of $147 billion, Pepsi of $48 billion).
In North America, Cadbury Schweppes's 'route to market' through a series of deals with independent bottlers is complex and fraught with potential problems. If it can persuade the bottlers to be more efficient, and if the bottler market consolidates as it is expected to, then Cadbury Schweppes stands a good chance. But even old Cadbury hands wonder if the company can keep on going it alone. The reality is that it is third to Mars and Nestle in the confectionery market, and third to Coke and Pepsi in fizzy drinks. 'Will it ever be a serious threat to Coke?' asks one. 'I don't think so. But Cadbury Schweppes always finds a way to step into the next phase quietly, and I would bet there will be some kind of new partner in the next 10 years.'
What kind of partner? Where and when? It's only speculation and presumably, given Dominic Cadbury's avowed mistrust of mergers, such a move would signal another major shift in strategy, possibly one he doesn't agree with. Yet his imprint is still very firmly on the company, isn't it? Well, he says, things have changed but yes, the fundamental strategies remain the same. For a moment he looks rather wistful and you can't help wondering how much he must miss that clenched grip on the reins of power.
Still, there are compensations to being chairman, not least that he earns rather more than his chief executive (Cadbury took home £667,000 in 1996 compared to Sunderland's £546,000). And more time to pursue his own interests?
Absolutely, he says, so long as they dovetail with what is good for the company, like his interest in education and training. No, I say, more time to have a private life. He frowns. Tennis, I say, rather tentatively.
I am told you are a great tennis player?
For a moment Cadbury looks rather depressed. Have I said something wrong?
'No,' he laughs, 'it's just when people ask you what else you do, I always think: do they really need to know?' Under duress, he lists some of his favourite things: tennis, golf, shooting, holidays in Africa with his South African wife and his three daughters. Opera and ballet. And he goes to the gym, because his back has been playing him up lately. 'And that's it, really,' he says. 'Have we covered everything?'
Well, I say, there is Camelot. His face falls again. Cadbury Schweppes is, of course, a minority shareholder in the company that runs the Lottery and is doing very nicely out of it. However, the new Labour government wants to put the Lottery into non-profit-making hands. Any comment? 'Hmm,' he says, 'that's a fast ball.' Finally he states that, given the risks involved and the huge amount of complex technology, he doesn't think anyone could have set it up successfully on a non-profit-making basis. His company would never have got involved on that basis. 'But good luck to the lot that do it,' he adds, 'if that's what they want.'
Does he buy a ticket? Yes, he says, standing up and walking over to his desk to find his numbers. As he is neither a director nor an employee of Camelot, he is quite at liberty to do so. He joins a small office syndicate every week. But what if he won? What would the tabloids make of it? 'I am prepared to handle the problem,' he says drolly. Still, it probably wouldn't change his life much, as he is what he appears, a rather serious man who, despite being wealthy, has never been an extravagant spender. According to one friend, he just has 'too much of the Protestant work ethic'. It is, perhaps, his way of dealing with the burden of family heritage.
Born 12 May Educated Eton College, Trinity College, Cambridge and Stanford Business School, US
Graduate trainee, Cadbury
Managing director, foods division, Cadbury Schweppes
Chief operating officer, Cadbury Schweppes, North America
Managing director, Cadbury
Group chief executive, Cadbury Schweppes
Chairman, Cadbury Schweppes
WHAT PEOPLE SAY
'Dominic has fantastic focus, he can always shut out the irrelevances. I tend to be more interested in the analysis. He also has a great sense of timing and the ability to take decisions firmly.'
Sir Adrian Cadbury, Dominic Cadbury's brother
'I would say he is an intelligent businessman, rather than an intellectual one like his brother. What's the difference? Well, an intellectual would build a business model that should work, and if it doesn't, he would change the model. An intelligent man, if things don't work, changes his behaviour.'
Derek Williams, former head of Coca-Cola Schweppes Beverages
'Dominic is a tough manager because that's his character. He is tough on performance and he is tough on himself. I don't think it is because he has something to prove as a Cadbury. Whatever he did, wherever he worked, he would have displayed the same characteristics.'
John Sunderland, chief executive, Cadbury Schweppes
'Dominic is a serious person. The Cadbury family set high standards which the children have to live up to.'
David Mayhew, an old school friend and a partner at Cazenove & Co.
'It was always clear he had exceptional talent and he would have got to the top whatever his name.'
Sir Robert Clarke, chairman of Thames Water, and formerly at Cadbury Schweppes.