Cadbury to cut 438m out of costs, reveals newspaper

By Ahmed ElAmin

- Last updated on GMT

Related tags Soft drinks Dr pepper snapple group

Cadbury Schwepps will attempt to drive down costs in its
confectionary arm by £300m (€438m) a year and enter the US sports
drink market, according to a newspaper report.

The amount of the costs cuts were revealed by unnamed sources, who were quoted by the UK Sunday Times .

The newspaper said the detailed proposals are nearly settled.

The details will be given on 19 June, when the company is scheduled to give a trading update.

In announcing last week that it would separate its confectionery and US soft drinks businesses, Cadbury chief executive Todd Stitzer also said the company was examining options to boost the performance of its confectionery business, including a detailed review of costs.

Such options include methods to improve confectionary's margin performance in emerging markets, reconfigure its supply chain, and reduce administrative expenses.

The company decided to release its plans for a split after activist investor Nelson Peltz took about three per cent of its shares.

The move would essentially split the business in half in terms of profits, with top brands like Dairy Milk chocolate and Halls on one side and Dr Pepper and 7 UP staring across from the other.

Since 1999, Cadbury has sold its beverages businesses in about 180 markets.

In 2006, its sold the beverages operations in Europe, Syria and South Africa for £1.4bn.

The Americas beverages business has a portfolio of non-cola carbonated soft drinks, including Dr Pepper, 7 UP, Sunkist and A&W. It also produces non-carbonated soft drinks such as Snapple, Mott's, Hawaiian Punch and Clamato.

The acquisition in 2006 of the company's key independent bottlers, gave Cadbury control of the manufacture and distribution of about 40 per cent of its volumes.

"The integration is proceeding to plan and we are beginning to see material benefits from our stronger distribution platform, broader distribution for our brands, greater focus on faster growing and more profitable channels, and improvement in our cost competitiveness," Stitzer said.

Further growth will be driven by entering the high-growth sports drink market through the forthcoming launch of Accelerade, he said.

Meanwhile on the confectionary side of the business Cadbury claims to be the largest in the world, with a 10 per cent global market share.

It claims to be number one or number two in nearly half of the world's top 50 confectionery markets.

Confectionery revenues have grown at over 5 per cent per year over the last three years compared to an average of 3 per cent per annum in the previous three years, the company said.

"This acceleration in revenue growth has been driven by a shift toward higher growth categories and markets, increased innovation and higher growth investment," Stitzer said.

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