Cadbury struggles in poorly performing UK market

By Catherine Boal

- Last updated on GMT

Related tags: Cadbury plc, Chocolate, Cadbury schweppes, Uk

Confectionery giant Cadbury Schweppes has been forced to lower
profit expectations after feeling the effects of poor performance
in the UK market.

The chocolate maker's reputation was severely damaged by a health scare and subsequent product recall earlier in the year.

According to a trading update released yesterday, Cadbury has yet to recover wholly from the scandal and was further hit by a downturn in the confectionery market over the summer.

Sales since July this year have shown a 5 per cent year on year drop but the company are hoping new products such as Flake Dark and Cadbury Melts will reinvigorate UK business.

CEO Todd Stitzer said: "Despite the impact of the product recall and weak confectionery market in the UK, we are encouraged by the recovery in consumer confidence and the successful launch of some new products."

In June, the company withdrew seven product lines in the UK and two in Ireland after several samples of Cadbury chocolate were found to be contaminated with salmonella. The recalled lines represent about three per cent of sales in the UK and about half a per cent of the group's total sales.

Overall, Cadbury spent about £13m (€19.4m) on the recall and expected total net costs to be in the range of £20m (€29.8m), of which the company expected to recover £6m (€8.9m) from insurers however costs could spiral if a prosecution from the contaminated factory's local council goes ahead as planned.

Cadbury sales in the UK market fell by 14 per cent during the first six months of 2006. The company noted that its share of the UK market fell by 1.1 per cent during the period.

Performance was further affected by the hot weather in the UK market, where confectionery sales by all manufacturers fell by seven per cent year-on-year.

Related topics: Ingredients, Mondelez International

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