“The goal is to block the entrance of Cadbury [into the Israeli market] within the next season, to cause them a major failure, so that it will serve as an example to others.” That was how food giant Strauss described its strategy against the British chocolate brand, which was poised to enter the Israeli market, in a presentation for its executives.
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Strauss treated Cadbury’s launch as if it were preparing for war, according to documentation compiled by Cadbury’s Israeli importer, Carmit, which is suing Strauss.
Strauss’ strategies included industrial espionage, pushing Cadbury off the shelves, exerting financial pressure on distributors and harming other products distributed by Carmit, the importer alleges.
The tactics that Strauss deployed against Cadbury have already drawn fire from the Antitrust Commissioner, who fined the company 5 million shekels ($1.43 million.)
Carmit filed a civil suit against Strauss and several of its executives in 2010, seeking 22 million shekels in damages. In the suit it alleged that the company abused its monopoly power to prevent competitors from entering Israel’s market. The testimony phase of the trial is slated to begin next month.
The suit alleges that Strauss brand Elite sought to block new competitors by whatever means possible, violating antitrust law in the process. Elite’s lawyers called the claims baseless, and said all the company had done was change its directives to one corner store, two kiosks and two wholesalers, and for no more than a month at that.
A document from a Sept. 9, 2002 Strauss executive meeting, which Carmit included in its suit, revealed the company’s concern over the prospective competitor. “We need to block Cadbury, create red stands [Elite’s brand color], foil our competitors, create the maximum amount of special packages for the private market, fill up the shelves so that Cadbury can’t be sold. We can boost sales through discounts,” it stated.
One slide in a presentations presented to management in 2002, before Cadbury’s launch, read: “We can’t let the roach turn into an elephant. Each one of us will fail if Cadbury succeeds.” Another slide read: “It’s our responsibility to make sure that their [Cadbury’s] fate is the same as Nestle chocolate and Rajwan coffee.” Both slides are included in the lawsuit.
Carmit’s suit alleges that the presentations were hidden from the Antitrust Authority and revealed only when Strauss was investigated. They include information allegedly obtained through industrial espionage, including Cadbury’s full market penetration strategy. It includes precise data on which products were to be introduced to Israel, when TV ads were scheduled to run, and how its shelves would look.
Another slide stated, “Should we take this opportunity to wipe them [Carmit] out?”
Another document, a January 2003 letter from one Strauss executive, noted that Cadbury was receiving shelf space, and called on the company’s shelf organizers to leave stores “only once Cadbury is in the place it deserves.” It also called on managers to halt discounts to distributors that stocked Cadbury.