Cadbury joins rivals in warning of poor summer drinks sales

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The Independent Online

Cadbury Schweppes, the confectionery to soft drinks group, followed rivals such as Unilever and Coca-Cola yesterday in admitting the poor summer had taken its toll on its sales, knocking its shares.

The maker of 7UP said it now expects to report full-year sales and profits at the lower end of the targets it set last year as part of a four-year transformation programme.

It said the European drinks market had "a more difficult summer than anticipated", blaming the "cold and wet" weather for lower sales of Orangina in France and La Casera lemonade in Spain.

Although its European drinks business is the smallest part of the group, Cadbury also had to battle against a weak fizzy drinks market in the US. It said its brands, which include Dr Pepper, had taken market share from rivals such as Pepsi, although its non-carbonated drinks division is still struggling.

Analysts were largely reassured that the summer had not been worse for Cadbury, but the group's shares nonetheless slipped 8.25p to 426.75p. Julian Hardwick, at ABN Amro, said: "The key message is that they are still on track to deliver results within its range. In reality, most people's forecasts had assumed they would be at the lower end." He expects the group to report pre-tax profits of £940m, on a 3 per cent gain in underlying sales and a margin rise of 50 basis points. Cadbury had been targeting sales growth of 3 to 5 per cent and margin expansion of 50 to 75 basis points.

The group's trading news was contained within an update designed to reassure the City that the integration of its £2.5bn purchase of Adams, the chewing gum to throat sweets business, was on track. In August, it took control of back office services such as distribution. It has set up two new distribution centres to cover the US, and intends to switch Adams' Canadian business to its systems next year.

The group said the cost of integrating Adams was within budget, despite running two systems side by side.

Meanwhile, the launch of new chocolate bars, such as the Kit Kat-lookalike Dairy Milk Wafer, helped its confectionery businesses to perform well.

On Monday, Unilever said the damp summer had hit its Walls ice cream business, while Coca-Cola, Nestlé and Diageo have all also struggled with weak consumer demand.