Cadbury Schweppes' £1 billion sale of its European beverages business will enable it to focus and invest on the group's global confectionery business.
The sale will help reduce the group's £4.3 billion debt, and will place the company in a better financial position should it wish to further its interests in confectionery.
A number of private equity groups are in the running for the European beverages arm of Cadbury Schweppes, but thought to be leading the race is the Carlyle Group which recently appointed former PepsiCo executive Nish Kankiwala to lead the bid.
Cadbury Schweppes spokesperson Katie McDonald Smith told ConfectioneryNews.com that the fundamental reason behind the sale was that the company "simply saw better returns in confectionery than European beverages". She was however keen to point out that the company continues to operate beverage businesses in other parts of the world.
There appears to be nothing in the pipeline at the moment in terms of acquisitions. Cadbury Schweppes' acquisition of Green and Blacks as a 'bolt on acquisition' in February was successful because it fitted easily into its portfolio without massive financial commitment. The purchase was based on a "long-standing relationship with the company and it was felt the move would be hugely beneficial to both parties," said McDonald Smith.
Further focus by Cadbury Schweppes in this area of confectionery wouldn't come as a surprise; the organic chocolate market is thought to be growing at 30 per cent a year in the UK since 2002. Whilst the UK's overall chocolate market could only manage 1.5 per cent growth over the same period of time, further investment in organic and premium chocolate would surely provide healthy returns.
A trend in the market is certainly becoming more apparent. Last year Lindt saw 37 per cent growth, and other premium companies like Thornton's are also thought to have had successful years.
This move to shed European beverages in favour of concentrating on confectionery along with its other worldwide beverage interests could see the company maximize returns, should further investment be made to fully capitalize on a changing market.