More cost savings on the cards at Cadbury

30-Jul-2008 - Last updated on 06-Aug-2008 at 13:22 GMT

Cadbury has signalled that it will take “whatever measures are necessary” to deliver on its 2008 performance promises – despite H1 results that show good profit growth.

The confectionery group, which completed its demerger from the Dr Pepper Snapple Group (formerly Americas Beverages) on May 7th, has reported revenues of ₤2653m, up 14 per cent in reported currency on the 2007 period (restated since the demerger).

Profit from operations was ₤148m compared to ₤115m.

The economic downturn has hit suppliers of luxury goods as consumers tighten their belts, but the indications are that chocolate-eaters are still spending on sweet treats.

Nonetheless, with the aim of delivering margins in the mid teens by 2011, Cadbury is taking no chances on factors that are affecting the food industry at large – such as raw material and energy costs.

Chairman Roger Carr said: “Against a background of more challenging economic conditions, we will take whatever measures are necessary in costs, prices, organisation structure and business portfolio to underpin and deliver the performance commitments we have made for 2008 and beyond.”

There are expectations that this could include more job losses and factory closures. But CEO Todd Stitzer told a briefing that the review will take a few months, and more news may be forthcoming in the October and December trading updates.

Cocoa prices that have soared over 30 per cent on last year’s level, and oil prices are up 50 per cent.

On the positive profits news, the group has said confectionery growth was “robust” across all its key markets – both developed and developing – with the exception of France and southern Europe.

Chocolate revenues were up 6 per cent, candy revenues 7 per cent, and gum 10 per cent.

Cadbury has brought on board a more co-ordinated approach to its categories, which includes focusing on “fewer, bigger initiatives”.

Of its 13 focus brands, Cadbury Dairy Milk, Trident and Halls were the best performing, with growth of 9, 13 and 12 per cent respectively. Growth in Dairy Milk is said to have been “exceptional” in emerging markets.

Trident has also seen the launch of several innovations, including centre-filled gums launched in Mexico and South America and longer-lasting gum in Europe.

For full year 2008 Cadbury is expecting revenue growth “at the top end” of its 4 to 6 per cent target range, and margin growth “in line with current market consensus”.

Commodity cost increases are expected to remain at around 5 to 6 per cent, but to be weighted towards the second half of the year.