Chocolate boom helps Cadbury beat market expectations

By Guy Montague-Jones

- Last updated on GMT

Related tags: Strike action, Investment, Trade union, Cadbury

Buoyed by strong second quarter chocolate sales, Cadbury has beaten market expectations for the first half of the year.

In constant currency terms, sales were up 4 per cent for the year half to £2,767m, while chocolate sales increased 10 per cent.

Bernstein Research analyst Andrew Wood said the results were ahead of expectations. He said: “After a lacklustre start to the year, these results indicate that the weak Q1 sales performance was a one-off.”

“There was strong Q2 organic growth (6 per cent), showing a significant acceleration over Q1 (2 per cent) helped by continued good performance in the emerging markets (8 per cent in Q2).”

Cadbury said emerging market growth was “very good”,​ especially in India and South Africa. This growth helped offset weaker figures from Europe.

Stay at home culture

The UK was an exception to this trend, as sales improved thanks to what the company referred to as the growing stay-at-home culture. Buttons and Wispa were a couple of the strong performers in the country.

Sales of gum and candy, trailed behind chocolate, but Cadbury said figures improve in the second quarter, particularly in the US.

Margins also improved helping underlying operating profit climb 19 per cent in constant currency terms to £319m.

On the back of the encouraging first half of the year, Todd Stitzer, CEO, confirmed the outlook for the full financial year. He said: “Looking forward for the year as a whole, given the continuing economic uncertainty, we reconfirm our guidance to deliver revenue growth around the lower end of our 4-6 per cent goal range.

“In addition, we now expect to deliver a full year margin increase of between 80-100 basis points in constant currency.”

Cost cutting

To achieve margin improvements, Cadbury has put in place a number of cost saving initiatives. Marketing expenditure was a recent target. In the first half of the year, spending on marketing fell to 10.7 per cent as a percentage of sales as opposed to11.6 per cent a year earlier.

Since 2007, the chocolate company has also closed some factories and cut jobs in order to improve efficiency and cut costs. The trade union Unite claims these savings and the company’s profit growth have been achieved at the expense of its workers.

This weekend workers at the company begin voting on strike action. Unite claims that Cadbury broke a three year pay deal and organised a protest earlier this month to voice its disquiet. The ballot on industrial action will run to 18 August.

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