Cadbury acquires South African gum business

By Anthony Fletcher

- Last updated on GMT

Related tags Cadbury schweppes Africa South africa

Cadbury Schweppes has completed the acquisition of South Africa's
leading chewing gum business from Botswana-based Dan Products.

The deal, worth 33 million in cash, was fist announced back in February. It will see Cadbury take over production and sale of the Stimorol and Dirol brands, which are sold largely in South Africa.

The UK-based group believes that the deal will reinforce its strong participation in the fast-growing South African market, and its platform for expansion into other Southern African markets.

In 2005, the business' revenue is forecast to be ZAR93 million (9m), and earnings before interest and tax (EBIT) ZAR35 million (3 million).

The move is the latest attempt by Cadbury Schweppes to exploit the continued global growth of chewing gum. The company recently announced that the company's confectionery revenues were up 6.3 per cent, resulting in market share grains in 16 out of its 20 top markets.

Gum sales were responsible for much of the growth, which isn't surprising considering the upturn in chewing gum sales worldwide. Total US chewing gum sales alone, excluding Wal-Mart sales, stood at $944 million for 2005, up 23 per cent since 2002, according to ACNielson.

Cadbury's US confectionery foothold, particularly in gum and medicated sweets, was boosted with the purchase of Adams in 2003. It is the integration of these brands that management today cited as making the company's gum-driven confectionery growth possible.

The other key factor behind Cadbury's sales growth has been its concentration on emerging markets, which in 2005, accounted for 30 per cent of the company's confectionery business.

Sales in Latin America increased 13 per cent, in Africa by 10 per cent and rose 11 per cent in Asia Pacific. In comparison the company's developed markets were largely stagnant.

Cadbury Schweppes also announced in February that it intends to sell Bromor Foods, which sells branded concentrate and other soft drinks in South Africa. In 2004, Bromor's revenue was ZAR767 million (65 million), and underlying profit from operations was ZAR72 million (6 million).

The group also recently raised its stake in its Nigerian confectionery business.

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