This article is about the old Cadbury Schweppes company. In 2008, Cadbury Schweppes spun off its beverage division into Dr. Pepper Snapple Group (DPS), and kept confectionery under the Cadbury plc (CBY) name. As such, this article contains outdated information and should be used only as a historical reference.

Cadbury Schweppes PLC (CSG) is a leading global company in the confectionery and beverage market. In the confectionery segment, the company markets a variety of chocolates, sugar confectionery and gum under the brand names of Cadbury, Trident, Halls, Dentyne, Hollywood, Bubbaloo, Stimorol, Trebor, Wedel, Basset's and Maynards. In the beverage segment, Cadbury manufactures, as well as licenses, concentrates and syrups to independently owned bottlers and canners. Major brands include: Schweppes, Dr Pepper, 7 UP, Snapple, Hawaiian Punch, Mott s, Orangina, Oasis, Clamato, Canada Dry, A&W, Sunkist, Yoo-Hoo and La Casera. Cadbury Schweppes is based in London, United Kingdom and reports financial statements in British Pounds Sterling and in conformity with United Kingdom Generally Accepted Accounting Principles (GAAP). Cadbury Schweppes reports financial results semi-annually (in late February and early August) rather than quarterly.

The company's current structure reflects management's actions over the last five years. In February 2003, management implemented a major reorganization, which consolidated the nine regional operating units into five: Americas Beverages, Americas Confectionery, Europe, Middle East, and Africa Confectionery, European Beverages, and Asia Pacific. In 2006, the company divested the European Beverage business and operated under four regional operating units: Americas Beverages (35% of revenues and 47% of operating profits in 2006) Americas Confectionery (18% and 17%) Europe, Middle East, and Africa Confectionery (31% and 23%) and Asia Pacific (16% and 13%). The Americas Beverages business (recently renamed Dr. Pepper Snapple Group) is slated for de-merger in 2008 through a spin-off to shareholders. Management's goal is to leverage the company's scale and advantaged positions in confectionery by concentrating on top markets, brands, and customers and by driving cost and efficiency gains to increase margins.

The acquisition of Adams Confectionery for $4.2 billion from Pfizer on March 30, 2003 was a major strategic move. The purchase significantly expanded Cadbury's geographic reach and catapulted the company into the number one position in the worldwide confectionery market. Cadbury Schweppes is leveraging the combined operations and routes-to-market in order to drive down costs. In North America, the company integrated its systems with Adams. In addition, the Adams integration projects have been successful with the installation of SAP in Brazil and the consolidation of back-offices across the Latin America among other projects. It should be noted that in 2003, the acquisition of Adams resulted in management rescinding its performance goal of at least 10% earnings per share growth annually due to the dilution of the acquisition.

On June 19, 2007, management announced the Board's decision to divest the company's Americas Beverages business, leaving Cadbury almost entirely a confectionery company with minimal beverage operations in Australia. Following the divestiture, the company will be renamed Cadbury PLC (from Cadbury Schweppes), and will have operations mainly in three categories (chocolates, gums, and candies). The company operates in four regions: Americas Confectionery (27% of revenues in 2006), Britain, Ireland, Middle East, and Africa (BIMA, 31%), Asia/Pacific (25%), and Europe (17%). In light of the higher growth prospects of the stand-alone confectionery business, management has set new financial goals for the period between 2008 and 2011: revenue growth in the range of 4% to 6% (up from the earlier estimated range of 3% to 5%), and an operating margin in the mid-teens.




Investing in the Future

In January 2008, Cadbury announced that the firm would invest money in coca farming areas in Africa and Asia. These areas, which are among the largest producers of cocoa in the world, and thus the biggest suppliers, are currently experiencing a decline in the amount of farming. The cocoa supply may be diminishing in the future without intervention which Cadbury is currently proposing. Cadbury will give money to help farmers and their families to sustain their cocoa cultivation in areas where they are currently experiencing a decline. This will help produce goodwill and sustained supply when no other competitor is following a similar path. Input costs will be lower for Cadbury than its competitors in the future and this will result in better earnings potential for the firm.

References

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