01 Sep 2005 - The Board of Cadbury Schweppes plc today announces its intention to sell its Europe Beverages business. Cadbury Schweppes expects to commence the sale process in the near future.
Following a strategic review of Europe Beverages, the Board has decided to focus the Group's financial and management resources on its confectionery and other beverage businesses which have greater potential for higher growth and returns. Proceeds from the sale will initially be used to reduce the Group's net debt which at June 2005 was £4.3 billion.
Todd Stitzer, CEO of Cadbury Schweppes said, "Europe Beverages has a great portfolio of brands, a talented management team and strong routes to market. I'm proud of the commitment and dedication of its workforce. However, the potential for growth and value creation is greater in the Group's other operations, and therefore we believe it is in the best interests of our shareowners to investigate a sale of the business."
Overview of Europe Beverages
In 2004, on an IFRS basis, Europe Beverages' revenue was £653 million and underlying profit from operations was £116 million, representing 10% and 11% of the Group's revenue and underlying profit from operations respectively. Its sales volume of 1.7 billion litres makes it the third largest player in the European carbonated soft drinks market.
Europe Beverages' principal products are carbonated soft drinks, mineral waters and still drinks. Its main brands are Schweppes, Orangina, TriNa, Oasis and La Casera which account for around 75% of sales. Other brands include Apollinaris, Pampryl, Gini and Vida. Products are sold across Continental Europe, with some sales in the UK, parts of North and West Africa and the Middle East. Sales are concentrated in three countries, France, Spain and Germany, which account for around 85% of total sales.
The business has wholly owned bottling operations in Germany, Spain, Portugal and Belgium and a production arrangement with San Benedetto in France. In other countries, the business operates through licence agreements with third party manufacturers and distributors. The business has around 3,000 employees.
Strategic Rationale for Sale
Cadbury Schweppes adopted its Managing for Value philosophy in 1997 and remains committed to utilising its assets to exploit growth opportunities and drive value creation. The Group has five goals which support Managing for Value. The overriding goal is to consistently deliver superior shareholder returns. This is supported by two commercial goals which are to profitably and significantly increase global confectionery share and profitably secure and grow regional beverages' share.
Following the acquisition of the Adams confectionery business in 2003 and subsequent organic growth, Cadbury Schweppes has become the leading company in the global confectionery market. It has the broadest category participation and geographic footprint in the global confectionery industry. Investments in marketing, innovation, science & technology and sales & distribution have accelerated the Group's confectionery sales growth: in 2004, confectionery sales grew by 6% compared with average annual growth of 3% in the previous 3 years; in the first half of 2005, the Group's confectionery sales grew by 7%.
In beverages in the Americas, the combination of the three North American businesses - Dr Pepper/SevenUp, Mott's and Snapple - into a single cohesive unit is enabling the Group to leverage fully the powerful brand portfolio of flavoured carbonated soft drinks (including Dr Pepper, 7 UP, Sunkist and A&W) and non-carbonated soft drinks (including Snapple and Mott's). With almost 18% of the US carbonated soft drinks market, the largest market in the world, the business generates high returns and cashflow. Together, the US beverage and confectionery businesses make the Group the 10th largest food company supplying the grocery trade in the US. Similarly in Australia, the combination of confectionery and full system beverage businesses has created the fourth largest supplier to the grocery trade.
The Board believes growth and returns can be increased through continued focus and investment on the Group's advantaged global confectionery business and regional beverage operations in the Americas and Australia. Therefore, following a strategic review of Europe Beverages, the Board has decided it would be in the best interests of shareholders to investigate a sale of the business.