Cadbury to miss targets for 2006

By Anthony Fletcher

- Last updated on GMT

Related tags Asia Southeast asia United states Cadbury schweppes

Cadbury Schweppes says that it is unlikely to be able to deliver
margin growth within the company's goal ranges for 2006, though US
gum sales have been strong.

"We expect to deliver good revenue growth in 2006, towards the upper end of our goal range,"​ said Todd Stitzer, CEO of Cadbury Schweppes.

"The majority of our businesses have performed well so far this year with our active innovation programme driving increased momentum across the group in the second quarter.

"We expect further growth in margins this year, although with continuing rises in oil prices it is unlikely that we will deliver margin growth within our goal ranges in 2006."

Gum sales in the Americas have been strong, driven by the US and Latin America. In the US, successful innovations are increasing the company's share in a buoyant market.

New products launched in 2006 include Stride, a new soft chew gum brand with long lasting flavour. The Trident brand has performed particularly well across the region, benefiting from the roll-out of new products, notably Trident Splash and new packaging formats on the core Trident brand.

Good growth in Halls in Latin America however has been offset by a weaker performance in North America with lower demand during the key winter months due to a weaker cough and cold season.

The group's Europe, Africa and Middle East (EMEA) region has had a challenging start to the year, particularly Cadbury Trebor Bassett (CTB) in the UK. Revenues and profits in CTB have been impacted by an estimated £20 million and £12 million respectively due to the combination of a weak market and increased discounting to clear high levels of inventory built up during the implementation of a new IT system in the fourth quarter.

Stitzer also said that the UK market is now modestly ahead and the firm's performance is improving with share gains driven by Easter and a number of new product launches in the second quarter. Green & Black's continues to perform strongly with further increases in distribution in the UK.

Elsewhere in Europe, Cadbury Ireland had a good Easter and Trident is driving healthy gum share gains in Spain, boosted by the launch of Trident Splash. In France, the market environment has been difficult due to retail price deflation and increased competition.

Performance in emerging market businesses in the region has been impacted by a slow start in two of our major markets, Russia and South Africa.

Finally in the Asia Pacific region, Cadbury says it is performing well with strong growth in emerging markets. India has had a particularly good half with increased distribution, innovation and growth in chocolate power brands driving further share gains.

"Our operations across South East Asia, notably in Thailand and Malaysia, are all seeing strong momentum from Halls and gum,"​ said Stitzer. "In Australia, our confectionery and beverage businesses are performing well."

Stitzer said that the company has, overall, made a good start to 2006.

"Most of our key businesses are showing healthy growth and we have made further share gains in a number of markets,"​ he said.

"After a relatively slow first quarter, which was impacted by difficult trading in our Europe, Middle East and Africa region, performance has improved in the second quarter as the rate of new product activity has increased."

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