Cadbury Schweppes plans £20m marketing boost

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The Independent Online

Cadbury Schweppes is planning an innovation and marketing push this year in an attempt to maintain its lead over its UK rivals, Mars and Nestlé.

Cadbury Schweppes is planning an innovation and marketing push this year in an attempt to maintain its lead over its UK rivals, Mars and Nestlé.

The group, which reported a 1 per cent increase in pre-tax profits yesterday, will spend an extra £20m in 2005 as it invests "more heavily" for growth.

It is aiming to boost the sales it gets from new products to 15 per cent by 2007, up from 9 per cent last year. New products such as Snaps - crisp-shaped, milk chocolate wafers - and a Luxury Roses selection box contributed £56m of sales last year, helping its Cadbury Trebor Bassett business to outpace Mars and Nestlé.

Todd Stitzer, the chief executive of Cadbury Schweppes, said a strong contribution from its carbonated soft drinks arm in the US and the third consecutive year of growth from its UK confectionery business had driven underlying sales 4 per cent higher last year.

The company shrugged off tougher consumer markets to hit all of the targets it set under a four-year turnaround programme - although margin growth was at the lower end of its targets after the wet summer in Europe hit soft drinks sales.

But the fall in the value of the US dollar took a bite out of its numbers on a reported basis, with pre-tax profits up just £11m to £933m. Four-fifths of its sales come from outside the UK. Its shares edged just 0.25p higher to 511.75p.

Beverage sales rose 2 per cent during the year, buoyed by a 5 per cent jump in sales of its US fizzy drinks such as Dr Pepper. Mr Stitzer admitted of 7 Up - which made some headway thanks to the successful launch of new low-calorie, fruit-flavoured variant called 7 Up Plus - were still likely to go backwards this year. Sales of the lemon-lime drink have risen only once since Cadbury acquired it 10 years ago.

Andrew Saunders, at Numis Securities, said: "Looking to 2005, the business looks in good shape, in our opinion, but will face renewed challenges in the US beverages market where new products from competitors, such as Diet Coke with Splenda Sucralose, will further raise the bar in the carbonated beverages market."

Cadbury believes demand for diet drinks will boost sales at its North American drinks arm: it is aiming to get half its sales from diet drinks within the next 10 years, up from 24 per cent last year. Mr Stitzer said: "We dance with elephants all the time but we have excellent brands in the US, where we focus on ... flavoured drinks and away from the cola area."

The company said it had completed integrating Adams, the business it acquired two years ago, ahead of schedule. It also said that John Sunderland, who broke City corporate governance guidelines when he became executive chairman, would take up a part-time, non-executive role this summer.