Cadbury Suffering in "Weaker" UK Market

26 Oct 2006

26/10/06 Cadbury Schweppes has said that trading in three of its four regions is in line with expectations at the interim results. However, EMEA's performance is being impacted by difficult conditions in the UK, the company said in a trading update ahead of its investment seminar at the end of the month.

Cadbury said that it continues to make good progress in Americas Beverages, Americas Confectionery and Asia Pacific driven by innovation and emerging markets, with share gains in key markets including US carbonates and US gum. Its emerging markets businesses are growing strongly, and its Mexican confectionery business is showing an improved performance. The integration of its bottling acquisitions is on track, with good early progress being made on cost and revenue synergies.

In EMEA improvement is being seen in Western Europe, Turkey and the Middle East. Russia has performed better after a slow start to the year. Its business in Nigeria (where Cadbury now has a majority ownership) continues to grow, but performance is being affected by the recent political and economic volatility.

In the UK, ahead of the important Christmas season, consumer confidence in the Cadbury brand is recovering well, with perception surveys showing a return to near pre-recall levels. However, the UK confectionery market has been weaker than expected, with sales since the beginning of July 5% lower year-on-year, largely as a result of unseasonably warm temperatures. Nevertheless, Cadbury said that overall confectionery market share remains ahead year-on-year, and its chocolate market share is strengthening, driven by our recently launched innovations, Cadbury Melts and Flake Dark, which are performing strongly.

Like-for-like revenue growth for 2006 for the Group excluding the UK is expected to be around the top end of our goal range. However, including the UK, we now expect overall Group revenue growth for the full year to be around the middle of our goal range. Given weaker trading in our high margin UK and Nigerian businesses, it is unlikely that we will see progression in underlying Group margins for the year as a whole, the company said.

Todd Stitzer, Chief Executive Officer, said: "We're pleased that the majority of our businesses are performing well with innovation and emerging markets continuing to drive good growth in the Americas and Asia Pacific. Despite the impact of the product recall and weak confectionery market in the UK, we are encouraged by the recovery in consumer confidence and the successful launch of some new products. As we enter this very important trading period, overall the Group is in good shape and we expect to deliver revenue growth in the middle of our goal range."