Cadbury Reports 2% Sales Growth, Reconfirms Guidance

Overall, Cadbury’s main chocolate markets delivered strong growth and good market share gains, particularly in the UK.

01/05/09 Cadbury has reported further progress in the first quarter with guidance unchanged for 2009. Cadbury reconfirmed guidance to deliver revenue growth around the lower end of its 4-6% goal range and to make good progress toward its goal of mid-teens margins by 2011.

In the first quarter of 2009, Cadbury’s revenue benefited from strong growth in chocolate which more than offset a soft start for gum, in North America and Europe, and for Halls. This was achieved despite cycling strong prior year comparatives. As expected, trade de-stocking in the first few months of the year, particularly in the US and Canada, had a material impact on volumes, reducing overall revenue in the quarter by around 2%. As a result, overall base business revenue growth was 2%, reflecting price mix benefits of around 5%, partially offset by softer volumes, down 3%. Adjusting for trade de-stocking, volumes were down only 1%.

Cadbury said its business benefited from the breadth of its category and market portfolio. Overall, Cadbury’s main chocolate markets delivered strong growth and good market share gains, particularly in the UK. The increased demand for chocolate and bagged candies, typical beneficiaries of a stay-at-home culture, more than compensated for somewhat slower demand for our more functional or activity related products - medicated candies and gum.

Chocolate (48% of revenue in the quarter) delivered revenue growth of 7%, reflecting strong performances in the UK, India and South Africa. Australia grew despite clearing trade inventories in preparation for the relaunch of the core Cadbury chocolate brand in the second quarter of the year.

Gum (32% of revenue) delivered strong growth in South America and a robust share performance in key markets, including the US, Mexico and France. However, this was more than offset by underlying demand weakness in Europe and the significant impact of de-stocking in the US. As a result, overall gum revenue declined 2% in the quarter.

Candy (20% of revenue) delivered strong performances from mainstream candy brands in Australia, Middle East and Africa and Asia. However, a relatively weak cough/cold season for Halls in the first quarter of 2009 resulted in an overall candy revenue decline of 2%. Excluding Halls, candy revenues grew by 2%.

In emerging markets, revenue growth was good, up 6% for the quarter, led by India, South Africa and South America, which more than offset the expected impact of weak trading conditions in South East Asia and Russia. In developed markets, revenue was unchanged despite inventory reductions and weaker consumer demand, particularly for cough/cold candies.

In Britain & Ireland revenue grew 10%, reflecting continued significant market share gains in the UK including the benefits of a strong Easter for Cadbury. Seasonal products performed strongly, with both shell eggs and Cadbury Creme Egg up over 20%. Growth also included the sustained benefit of innovation from countline products (i.e. our single-serve products excluding moulded chocolate, for example Wispa) launched in the last nine months of 2008. Overall, Cadbury’s UK market share in chocolate including the Easter period rose by over 200 bps.

In Europe, revenue was down 8%, with only Poland delivering good growth. Most markets continued to see weaker consumer demand and several were impacted by some trade de-stocking.

In the Middle East and Africa, revenue growth of 12% was led by a strong performance in South Africa.

In Asia, revenue grew by 11%, reflecting strong performances in India and China which more than offset softer markets in South East Asia.

In Pacific, revenue was 3% ahead. The business in Australia grew well despite reducing inventories as part of preparations for a major product relaunch in the second quarter.

Revenue in North America was down 6%, reflecting significant de-stocking, particularly in the US and Canada, and softer demand. However, adjusting for reduced trade inventories, revenue was unchanged. 

In South America, revenue growth of 10% was strong in a weaker economic environment, with market share gains and modest volume growth underpinning the positive performance.