Investing for growth

by Gordon on Monday 5th March, 2012

The American food giant, Kraft Foods, has unveiled its new research and development facility, the Global Centre of Excellence for Chocolate Research and Development, at Bournville in Birmingham.  This is the original home of the Cadbury Company, which Kraft bought for £11.5bn in 2010.

The £17m centre is set to create 54 new jobs and will feature innovation labs, a pilot plant and a kitchen for experimentation.  The investment is fundamental to keeping the company’s competitive edge and would allow the Bournville site to build on its heritage in developing new products and testing consumer tastes.  (BBC, 1st March 2012; The Times newspaper 2nd March 2012)

In 2008, Syngenta, one of the world’s leading research and development companies in crop protection systems, also proposed a large-scale investment in its UK manufacturing capabilities in order to meet customer demand.

At that time, global demand for one of its best-selling fungicides was outstripping Syngenta’s ability to supply.  The proposed £150m investment was to allow expansion of its Grangemouth production site in Scotland. In order to determine whether the results would justify the investment, Syngenta looked at both financial returns as well as strategic issues for and against the project.

By analysing projected cash flows and costs, Syngenta was able to conclude that the investment would earn significantly more than it cost and would allow the company to expand into new markets.   Like the Kraft investment, the project also created new jobs for the area.

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