Gum rescues Cadbury from sticky situation

By Catherine Boal

- Last updated on GMT

Related tags: Marketing, Cadbury plc, Cadbury adams, Cadbury schweppes

Even after a year marred by salmonella contamination, product
recalls and financial irregularities, Cadbury Schweppes has posted
9 per cent growth in full year profits as the company's portfolio
feels the benefit of strongly-performing gum brands.

Underlying profit before tax rose from £865 million (€1,282m) to £931 million (€1,380m) for the confectionery giant. Overall growth was hindered by last summer's UK safety scandal when salmonella was discovered in the company's chocolate brands. A widespread product recall of core brands followed and the company has put the overall cost of the incident at between £30 (€44.5) – £35 million (€51.9m) in revenue and £5 (€7.4) - £10 million (€14.8m) in underlying profit. Costs include a £5 million marketing campaign to rebuild consumer trust in the country which was severely damaged by the news that Cadbury delayed in contacting the appropriate authorities after finding bacteria in sampled chocolate. But lack of consumer confidence may continue to damage sales as a UK newspaper revealed last week the company faces prosecution under environmental health law. Another blow to the company came in November when financial figures for its Nigerian operations were deliberately falsified to overstate profits. The business is currently under review by investigative accountants and has cost Cadbury £53 million (€78.5m) in reported earnings. Growth in the face of these damaging incidents has been attributed in part to Cadbury's booming gum sector. In particular, the company's core gum brand, Trident recorded growth of 23 per cent. The product is set to enter the UK market within the next few months. Innovation has also played a part in strengthening the company portfolio – new centre-filled gums under the Stimerol, Trident, Hollywood and Dirol brands has pushed annual sales of the product past the £100 million (€131.5m) mark. Newly launched US long-lasting gum Stride and the growth of sugar-free gum in Asia have also contributed to the sector's 10 per cent rise in revenue. In contrast to the growth in gum, sales of sweet confectionery have stagnated for the company and the chocolate sector experienced minor growth of 5 per cent outside of the UK. Emerging markets are at the forefront of Cadbury's agenda for the coming year. The company has invested heavily in Turkey, Nigeria and South Africa among others and is keen to build on the 9 per cent growth in existing business in Africa and the Middle East.

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