Nelson Peltz, the billionaire investor, has once again set his sights on Cadbury Schweppes, the world’s largest confectioner. After last year’s food fight with Heinz, what does Peltz’s fresh investment in Cadbury mean for the UK firm? Dean Best reports.
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Nelson Peltz, that mysterious activist investor in the US, is once more training his radar on Cadbury Schweppes.
The self-made billionaire first bought into Cadbury back in March, a move widely seen as the catalyst for the UK company’s decision to split its confectionery and drinks businesses.
Cadbury, which is in the process of demerging its US drinks arm from its core confectionery business, has always denied that Peltz was central to that decision and that the move – designed to boost margins from candy – had been two years in the making. Nevertheless, the news this week that Trian, Peltz’s investment vehicle, had increased its stake in Cadbury to 4.5% lends weight to speculation that he is keeping up the pressure on the company to improve its financial performance.
On Tuesday (11 December), Cadbury had some good news for investors in the form of a trading update. A recovery in Cadbury’s UK chocolate sales and growing US gum sales led CEO Todd Stitzer to up his sales and margin guidance for the company’s confectionery business.
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By GlobalDataHowever, Cadbury has a long way to go before it reaches the margins of peers like Nestlé and Wrigley. And, despite Cadbury’s plans to streamline its business worldwide to improve margins, Peltz could grow impatient, as he has at two of his more high-profile investments in the US, Heinz and Kraft Foods
Peltz spent the summer of 2006 in a battle with Heinz over the company’s performance, which he believed was not delivering enough for shareholders. The investor ended up on Heinz’s board after a period of acrimony with the company’s management but, this year, relations between the two sides seem a lot more cordial. In August, Peltz was re-elected to the company’s board while Heinz has looked rejuvenated; last month, the company booked a 12% rise in half-year profits.
Peltz has been on Kraft’s share roster since June and the US food giant has been busy restructuring its business with the sale of its US cereals arm and the acquisition of Danone’s biscuits operations. Peltz’s presence also seems to have had an effect on the make-up of Kraft’s boardroom. Out of Kraft’s 12 board members, 11 are now independent directors, a strategy that has seemingly pleased Peltz, who has now pledged to keep his stake in the company below 9.9%.
A certain amount of intrigue surrounds just how much influence Peltz has had on the fortunes of Heinz and Kraft but investors in Cadbury will be hoping that any perceived pressure from the investor will boost their returns in the months ahead.
