Packaging at forefront of Cadbury strategy
In its defence document published this week, the British company played up its position as a strong independent company and raised its performance targets for the next four years, including raising organic revenue growth to five to seven per cent per year, from its previously forecast four to six per cent, and forecasting improved margins of 16 to18 per cent by 2013.
Cadbury stated that it now intends to centralise decision making in order to make its procurement of packaging and flavours more cost effective.
Currently the Dairy Milk maker buys from over 20 flavour suppliers, spends over £400m on packaging from over 100 suppliers and spends nearly £70m on local IT support with global players, negotiated at the local level.
“In our review we have identified that roughly two thirds of our spend does not deliver the full benefits of effective procurement.
By aggressively managing these activities we believe procurement can deliver over half our total savings within cost of goods,” the company said in its defence presentation.
Packaging procurement made headlines for the confectionery company back in July this year, when it ended up settling out of court with packaging heavyweight Amcor on the eve of an AUS$236m (€135m) lawsuit in which the packaging supplier stood accused of price fixing.
The case dated back to the period 2000 to 2004 during which Amcor was alleged to have overcharged Cadbury for its corrugated fibreboard packaging as a result of its collusion with another supplier Visy.
The Amcor board told the Australian competition authorities in 2004 that its employees had been involved in price fixing with Visy Group. For blowing the whistle on the cartel, Amcor gained immunity from prosecution, while Visy was found guilty and fined AUS$36 million in one of the most high profile cases on its kind in Australia.
Amcor did not escape from the cartel unnoticed. Cadbury sued the company saying that it had been overcharged by Amcor for its packaging supplies. The case had been due to begin in the Federal Court in Melbourne, but was instead settled out of court.
