Blog: Dean BestCadbury looks to sweet talk investors

Dean Best | 14 December 2009

Cadbury formally mounted its defence against Kraft Foods' hostile takeover bid this morning (14 December) - and it was anything but flaky.

The Dairy Milk maker once again took a swipe at Kraft's "derisory" offer but the real interest was in the UK firm setting higher targets for sales growth, margins and dividends between now and 2013.

The new, aggressive goals may have surprised some investors. However, Cadbury's continued strong performance in 2009 and these ambitious targets should be enough to convince investors to shun Kraft's offer in favour of allowing the UK group to remain independent - or waiting for another bidder to emerge.

This weekend, there were conflicting reports in the UK over Hershey's intentions. Some claimed that the US confectioner was holding talks with Cadbury, while others said a split had emerged between a Hershey management concerned at the cost of a bid and a controlling shareholder that wanted a deal. For Cadbury's shareholders and employees, then, there are plenty of questions in the air as we approach the festive period.

The next couple of weeks are some of the busiest in your calendars and there remains a great deal of uncertainty over how this year's Christmas trading will pan out. Competition among UK grocers remains fierce and Tesco, facing continued pressure from the likes of Asda and Morrisons, has launched a series of promotions.

Across the pond, Asda's parent Wal-Mart has faced a challenging few months. Its last quarterly results highlighted a fall in same-store sales as competition heated up and food deflation kicked in across the sector.

Last week, Kroger, one of the largest grocers in the US, slashed its sales and earnings targets after a challenging third quarter, including a "soft" Thanksgiving period. The profit downgrade sent Kroger's shares tumbling but some retail watchers told us that, although Wall Street may be nervous that the retailer's price cuts are hitting margins, the company remains on the right track.

Worryingly, though, Kroger boss David Dillon is less than upbeat about the prospects for US grocers over Christmas. Will all retailers be lacking some festive cheer this year?


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