5 June 2008 – Cadbury has earmarked Euro 316 million for takeovers over the next 15 months and will continue with its strategy of targeted acquisitions in emerging markets, its CEO Todd Stitzer said in an interview. No bid for Hershey or any other big company is on the cards, nor is a major sale planned, he stressed.
Cadbury is currently the world’s leading confectionery company but may be overtaken by Mars, which has recently acquired Wrigley. Though Mr Stitzer admitted the possibility that Cadbury may lose its leading position in the US to Mars, he expected his group to remain at the top elsewhere.
In France, for example, Cadbury is the undisputed leader with an 18.6% share of the confectionery market, far ahead of runner-up Ferrero, thanks to local brands such as Hollywood (gum), Poulain (cocoa powder) and Malabar (gum). Once Mars and Wrigley’s merger is effective, the new group will account for 13.8% of the French confectionery market, second to Cadbury.
What counts isn't being the largest group, Mr Stitzer stressed, what really counts is being the best. Even if Mars overtakes Cadbury in future, the UK-based group will still be top in terms of sales growth and profit margins, he added. Cadbury’s real "Holy Grail" is reaching a 15% operational margin by 2011, up from 10% last year, Mr Stitzer pointed out.
Its CEO sees Cadbury’s success as being down to its portfolio, innovating spirit and focus on internal growth. The company has doubled the rate at which it introduces new products to the market. The Halls brand, which the group launched in France in 2006, has already captured a 5% share of the gum market.
This internal growth-driven strategy is strengthened by targeted acquisitions, primarily in emerging markets. Cadbury’s acquisition of Turkey’s Intergum, the country’s leading gum manufacturer, and its takeover of Kandia-Excelent, Romania’s second largest confectionery company, are consistent with this strategy.
Although Cadbury has slimmed down since it has spinned off its beverage unit, which now trades as Dr Pepper Snapple Group, Mr Stitzer wasn’t worried his group would become a takeover target for the likes of Nestle or Kraft or other food industry giants. "Since I came into the company in 1983, there hasn’t been a day without talks of a possible IPO. That’s part of the game," he said.
Mr Stitzer was confident that Cadbury’s growth and profit margins in 2008 would be higher than expected, despite soaring commodity prices which are forecast to add €114 million in costs at Cadbury this year. The company aims to absorb the increase through a two-pronged approach of cost reduction initiatives and price increases.
Cadbury’s plan to close 15% of its confectionery sites and cut its workforce by the same number over 4 years is now starting to bear fruit, its CEO said.
The company has already increased prices of its products by 5 to 6% on average at the end of the first quarter. These price rises are having only a minor impact on sales. "We aren’t selling cars or refrigerators, but small moments of happiness," Mr Stitzer said. "This works even during difficult times!"
