Oil costs hit Cadbury Schweppes margins

By Chris Mercer

- Last updated on GMT

Related tags: United states, High-fructose corn syrup, Soft drink

Rising oil prices are likely to make Cadbury Schweppes miss its
targets for profit margin growth this year, despite sales rises
across most of the business, the group said.

Cadbury said margin growth would be down on predictions in 2006, despite expecting to save £90m as part of its Fuel for Growth scheme.

Soaring oil prices have hit food firms hard over the last year, squeezing them between higher input costs and growing retailer pricing power.

Oil prices shot up to $74 per barrel earlier this week, after Iran's government threatened to disrupt supplies to gain leverage over western nations in the dispute over Iran's nuclear ambitions.

Cadbury said it expected margins to be flat for its first half, reflecting higher costs and rising power of discount retail chains.

The firm said sales growth was at the "upper end of our goal range"​, however, reflecting good performances in US soft drinks, as well as gum and confectionery across emerging markets in the Americas and Asia.

In US soft drinks, new launches such as 7UP Natural and Dr Pepper Berries and Cream have helped to reinvigorate growth on America's stagnant fizzy drinks market, Cadbury said.

Rumours have swirled that Cadbury may look to sell its US beverages business after offloading its European drinks division earlier this year.

Julian Lakin, analyst for Mirabaud Securities, told BeverageDaily.com​ Cadbury's North American drinks business "generates lots of cash, which it can plough into gum, chocolate and confectionery. But, ultimately, given this business is not actually growing, there's only so much cost you can squeeze out of it."

Cadbury has denied it has any plans to sell.

Related topics: Manufacturers

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