Cadbury goes sweet on premium chocolate
Wednesday 22 February 2006
The world's biggest confectioner, which celebrated its centenary year with its best sales growth for more than a decade, is trying to move its Cadbury brand upmarket to close in on its Swiss rival Lindt.
Sales of Green & Black's soared by 49 per cent last year as its powerful new owner extended the brand, which uses cocoa grown by Maya Indian farmers in Belize, into new products and flavours.
Cadbury's push into the higher-margin premium sector comes as it refocuses its attention on the UK after confectionery sales growth in its home market lagged other parts of its portfolio in 2005. UK confectionery sales grew 2 per cent, against 10 per cent growth from its Americas division.
Todd Stitzer, the chief executive, said the group would "re-energise" its innovation programme in the UK, after a quiet 12 months, while it focused on revamping its back-office systems, promising 2006 would be "much better".
He allayed concerns that soaring costs of products from aluminium to sweeteners would cause the group to miss its margin growth target for a second year running. In 2005, its margins grew 30 basis points, less than the 50 to 75 basis point growth it was aiming for. "We're confident that plans we have for price increases and cost reduction will more than offset the margin challenges that are still out there," Mr Stitzer said. Shares in Cadbury responded well, rising 14p to 574p.
Just months after offloading its European beverages arm for £1.3bn, the group pledged to raise up to £400m by the end of next year from selling other non-core businesses. It is using the proceeds to plug its £369m pension deficit and cherry-pick gum and chocolate businesses in emerging markets. It is making a one-off payment of £125m into its defined benefit scheme and upping its annual cash contributions. The move will cost it about £190m this year, it said.
Mr Stitzer sought to quash persistent speculation that the group's potential disposal list included its US drinks business, its biggest profit contributor. "We're focused on making that business work for shareholders," he said. Underlying sales at its Americas beverages arm grew 6 per cent last year.
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