Shares in Cadbury Schweppes rose this afternoon (18 December) after activist investor Nelson Peltz threatened to become "more active" if the UK confectioner failed to progress next year.

Cadbury's shares had risen 2.47% to 623p (US$12.54) at 17:42 GMT in the aftermath of Peltz's warning to the world's largest confectioner.

In a letter written to Cadbury today, Peltz's investment vehicle, Trian Fund Management, outlined how the company could improve returns to shareholders but warned of action if it fails to show "meaningful operational progress in 2008".

"If management and the board fail to make progress in the coming months on their initiatives and the plans we have outlined, Trian will look to become significantly more active in evaluating all of our alternatives as a large shareholder," Peltz and his partners wrote.

"If these targets are not achieved, we also believe there is a reasonable probability that matters will be taken entirely out of the hands of the board and management, as the company's underperforming standalone beverage and confectionary companies may well become acquisition targets."

Trian has amassed a 4.5% stake in Cadbury this year and Peltz has been widely seen as the catalyst for the ongoing restructuring at the company, including plans to de-merge its drinks interests and streamline its confectionery operations worldwide.

Last week, Cadbury said confectionery revenues and margins would rise this year after a recovery in UK chocolate sales and growth from its US gum business.

However, Peltz and his partners indicated their dissatisfaction with the company's performance, pointing to falls in its share price after performance updates were given to shareholders.

"We believe this trend signals that management's credibility with the company's shareholders is still very low, Peltz wrote. Peltz said the fund believes Cadbury's shares could be worth 970p, some 60% above the current share price.

The investor said Cadbury's plans to boost margins were "too little improvement over too long a time period" and outlined ways in which the company could improve returns to shareholders.

Peltz said Cadbury's management, led by CEO Todd Stitzer, should set "near-term" margin targets and increase its "medium- and long-term" goals for the company's confectionery business.

Cadbury announced in June that it would axe 15% of its workforce and close 15% of its manufacturing sites as part of a sweeping cost-cutting drive. Peltz wrote that those efforts should continue, while Cadbury should also consider selling off parts of its US drinks business after the de-merger.

Peltz argued that Cadbury should also add "several" directors to its board and said Trian had suggested candidates to join the company's boardroom. In recent weeks, another of Peltz's high-profile investments, Kraft Foods, has appointed a raft of independent directors to its board.

According to the Financial Times, Cadbury defended its progress in revitalising the company. "The board is confident that the company's strategy is in the best interests of all its shareowners and is pleased with the progress management are making," the company wrote to Trian.

"Recent trading performance has been strong, margin improvement plans are being actively executed and the beverages demerger is on track."