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Cadbury Defies Danone Threat With Sweet Sales

Posted on: Tuesday, 26 July 2005, 18:00 CDT

Jul. 26--Orangina-to-Dairy Milk group Cadbury Schweppes today shrugged off concerns that a PepsiCo takeover of French food and drinks group Danone would hurt its growth prospects.

There have been some worries in the City that, if PepsiCo pulls off a hostile takeover, the combined company will create a huge competitive threat to Cadbury.

But, finance director Ken Hanna today said: "I really do not think it would have a significant impact."

PepsiCo has declared it has "no present intention" to bid but analysts still predict a deal could be in the offing.

A rumour last week suggested Cadbury chief executive Todd Stitzer might gatecrash the potential takeover by buying the French company's mineral water arm, including the Evian brand. Hanna would not comment on that.

Today, Cadbury reported strong sales and profit growth for the first half of the year, largely due to a good performance in the UK.

Confectionery was the main driver of growth, particularly the Adams chewing gum business it bought for $4.2 billion in 2003. Former Adams brands, including Trident, are growing sales three times faster than the old Cadbury business, with a 12 percent pace.

Cadbury today cautioned that market conditions in the US drinks area were about to get a lot tougher as PepsiCo and Coca-Cola gear up for a host of product launches. Having seen Cadbury's successful launch of Dr Pepper Cherry Vanilla, the pair are widely expected to put out new dark cherry pops as well as colas. Cadbury's sales growth was up 7 percent in confectionery, with Dairy Milk up 9 percent, Trident 15 percent and Halls 17 percent.

New products drove half the sales growth in all categories, particularly helping in the UK where Bassett's sweets brands have also been revitalised.

European drinks growth was flat, however, amid a moribund market in economically-stricken France. But Orangina and Schweppes managed to expand their share of the market there.

In the half-year to 19 June, pre-tax profits jumped 6 percent to £370 million from £350 million a year earlier on sales of £3.13 billion against £2.95 billion.

Talk has been rife Cadbury will sell its European beverages arm. Goldman Sachs was appointed last month as joint broker alongside UBS, triggering expectations that it would handle any sale. Again, Hanna refused to comment.

Analysts say some of Cadbury's share price growth has been triggered by hopes it will fall victim to a takeover by Hershey of the US or Swiss giant Nestle. The shares today gained 3 1/2p to 545 1/2p. Although turnover was better than expected, Cadbury's guidance to the market on profits for the full-year remained unchanged.

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Source: Evening Standard

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