July 31, 2008
Credit Crunch Comfort-Eating Has Cadbury Coming Up Roses
By Rupert Steiner, Daily Mail, London
Jul. 31--Customers comfort-eating their way through the credit crunch helped Cadbury's exceed earnings forecasts.
Chief executive Todd Stitzer said: "No matter how bleak things look, people are still treating themselves to a little affordable indulgence. Confectionary is still a highly defensive category."
Stitzer has shrunk the size of chocolate bars in some regions as part of cost-cutting plans, and has switched to using cheaper Polish cows to supply milk for some UK products.
In its first figures since demerging its Dr Pepper Snapple drinks unit earlier this year, the maker of Crunchy, Dairy Milk and the Green & Blacks brand will pay a dividend of 5.3p a share, up from 5p the previous year. The shares sweetened 5 1/2p to 620p.
Underlying sales are up 7.3pc in an environment where costs of raw materials are accelerating fast. But while Stitzer admitted commodity prices have proved a stronger challenge than he anticipated, he has managed to hedge the cost of cocoa, which has risen 37pc over the year.
"We are pleased with our hedging but we can't tell where cocoa will be in 2009," he said. "It's just energy costs, which have risen 50pc, that will affect us later this year."
In Britain revenues grew by 3pc, driven from growth in its core Cadbury Dairy Milk brand and through the launch of the Crme Egg Twisted Bar.
Prices have already been hiked by 3pc and Stitzer has promised more to come. While he has no plans to reduce marketing spend, he is turning to internet viral campaigns and expects to get "more bang for his buck" from his advertising budget.
The company's Australian drinks business, the final legacy of its tie-up with Schweppes, is also under review. Analysts say it could be worth around £600m if sold. While no decision has yet been taken, Stitzer has begun separating certain commercial functions, in what the market will see as a clear signal.
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