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Cadbury Schweppes unwraps its confectionary strategies

By Karen Willmer , 19-Jun-2007

Following talks in London today, Cadbury Schweppes has officially announced its new confectionery strategies, to be implemented following the separation of its drink division, Americas Beverages.

Once the separation is complete, the company plans to rename as Cadbury plc, and undertake a cost reduction initiative in order to "focus on fewer, bigger and more value-creating initiatives" and "significantly reduce complexity across all aspects of the business". Today, Cadbury announced its plans to close 15 per cent of its manufacturing sites around the world, and cut 15 per cent of its workforce. It hopes to increase its percentage margins to the mid-teens by 2011, from the 2006 confectionery margin of 10.1 per cent. "We believe the business has significant under-exploited potential. Over the next four years our aim is to simplify our organisational structure to allow better execution of a more focused commercial strategy." In March 2007, Cadbury announced its plans to separate Americas Beverages and confectionery, today confirming that a "sale is the more likely outcome". The company claims this was due to the potential both businesses would have if they were to operate independently. The company estimated today that it will spend £450m (€666m), of which £50m (€74m) will be non-cash, on this cost reduction programme between 2007 and 2011. The company has also reorganised its confectionery business from three into four regions; Britain, Ireland, Middle East and Africa (BIMA) will come under one region, with Americas, Asian Pacific and Europe as the other three. This follows its recent acquisitions in the Turkey gum market and Romanian confectionery market, as well as non-core business sales in Australia, Canada and Italy. In addition, the firm yesterday made an offer to acquire a Japanese candy company. Zurich-based chocolate manufacturer Barry Callebaut also announced today its closer working relationship with Cadbury Schweppes, following the signing of a Memorandum of Understanding. This stated that it will supply an extra 14,000 tonnes a year of liquid chocolate and cocoa liquor to Cadbury's Polish sites by the start of 2008. Patrick De Maeseneire, CEO of Barry Callebaut, said: "The MoU with Cadbury Schweppes is another milestone in our strategy to take advantage of the ongoing outsourcing trend." Neither company wish to disclose the financial side of the deal, however Barry Callebaut will be supplying over a third of Cadbury's outsourced liquid chocolate. In a separate trading report today, Cadbury Schweppes also claimed revenues in the first quarter of 2007 were ahead by 8 per cent in the developed market and 11 per cent in the emerging markets.


It said gum growth had been strong, following its successful entry into this market in Russia and Turkey. It also holds a 10 per cent share of the UK gum market since its entry there in January. Cadbury's also said its Australian beverage business accounted for 8 per cent of its revenues in 2006.

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