Cadbury reveals demerger proposals

By Ahmed ElAmin

- Last updated on GMT

Related tags Cadbury schweppes Cadbury plc Cadbury dairy milk Dr pepper snapple group

Cadbury Schweppes yesterday filed regulatory documents outlining
the demerger of its Americas beverage business into a new
company, revealing the company's strategy to maintain its position
as the world's largest confectionery manufacturer.

Management's goal is to leverage scale and a dominant position to maximise growth and returns, Cadbury Schweppes said in a regulatory filing.

Cadbury's strategy is one that is becoming increasing common in the food and beverage industry, with management often citing the need to separate underperforming units from core and growing businesses.

Under the demerger proposals, shareowners will be issued shares in two new companies.

They will hold shares in Cadbury Plc, the new holding company for the confectionery businesses to be listed on the London Stock Exchange.

They will also receive shares in CSAB Inc., a new company holding the Americas Beverages business that wll be listed on the New York Stock Exchange.

The beverage arm is estimated to be worth about €10bn.

Cadbury Schweppes' products include brands such as Cadbury, Schweppes, Halls, Trident, Dr Pepper, Snapple, Trebor, Dentyne, Bubblicious and Bassett.

The company first announced its demerger plans on 19 June this year.

The company said the goal is to drive growth through a focus on "fewer, faster, bigger, better" participation and innovation.

Cadbury Schweppes also cited as a goal a desire to achieve cost and efficiency gains to increase marginsinto the mid-teens by 2011.

Management is targeting annual organic revenue growth of between 4 to 6 per cent, while increasing its market share of the confectionery segment.

The company plans to focus on 12 key markets, including the UK, US, Australia, Mexico, Brazil, India, Russia and Turkey.

Together, the 12 focus markets represent about 70 per cent of current total revenues.

The markets are forecast to account for about 60 per cent of expected category growth over the next five years, Cadbury Schweppes stated.

The company also identified 13 focus brands as Cadbury Dairy Milk, Trident, Halls, Dentyne, Flake, Green & Black's and the Natural Confectionery Company.

Together, the 13 brands currently account for about 50 per cent of confectionery revenues and have above average revenue growth and operating returns, Cadbury Schweppes staed.

Cadbury Schweppes is currently the number one confectionery firm in Western Europe, holding 11.6 per cent of the market, as well as being number one in terms of global sales.

This year, the company said it had boosted profits with its very successful moves within the chewing gum market, and the company now claims to be number one in 18 of the top 50 gum markets worldwide.

The company has also made some steps in the organic and premium chocolate markets with its acquisition of the Green & Blacks range, Meade added.

Like many other successful companies, Cadbury has made conscious efforts to reorganise operations in Western Europe in order to keep costs down.

Only this month, the company announced the closure of a factory in the UK in order to move production to Poland, while Cadbury is currently focusing on moving the main offices out of central London to a cheaper location.

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