Outlook: Cadbury snack

THE LAST six months have not been kind to John Sunderland, the well- groomed chief executive of Cadbury-Schweppes. Ever since he announced the proposed pounds 1.1bn sale of Cadbury's non-US soft drinks interests to Coca-Cola, the shares have been falling as regulators around the world queued up to block it.

The result has been a much-watered down version of the original, with the European sale abandoned completely and the sale in countries like Australia, South Africa and Mexico mired in regulatory negotiations. But with $700m due to be banked imminently from the first stage of the process, attention is turning back to where Cadbury goes next.

A look at the group's half year figures announced yesterday shows the company certainly needs a deal. In North America its Dr Pepper drinks brand is outperforming the market. But the Seven Up lemon and lime brand is going backwards as usual. The problem again is Coca Cola, which ambushed Seven-Up in the key southern California market in July. The Atlanta giant bought up huge amounts of retail shelf space for its Sprite brand, blasting Seven Up out of the market for nearly a month.

In chocolate the results were sticky too, particularly in Europe. Germany has slumped into loss, hit by the Russian crisis, the French market has declined and the UK stronghold was hit by de-stocking by wholesalers.

What should Mr Sunderland do? One option would be to pull out of beverages completely, but the only likely buyers are Coke and Pepsi, and the regulators would never wear it. Fortunately, these businesses do have their redeeming features - they throw off huge amounts of cash. More likely, then, is a confectionery deal. Mr Sunderland admits he is looking.

Chocolate is a surprisingly fragmented market when viewed from a global perspective, with even Nestle, the market leader, accounting for only 11 per cent, followed by Mars with 9 per cent. Cadbury has 6.5 per cent. A deal to buy Lindt of Switzerland, Ferrero of Italy or Suchard, part of Philip Morris, would put Cadbury in the premier league. Unfortunately, it is not clear these businesses are up for sale, or that Cadbury could afford the price.

Mr Sunderland has proved a patient, reliable pair of hands so far. But if he can't find a use for his cash soon, he may find that one of the bigger boys in the sector will gobble Cadbury up as its mid-morning snack.