The world’s largest confectionary company Cadbury Schweppes said today (7 June) that although it does not expect to report margin growth within its goal range for 2006 it does expect to deliver revenue growth at the upper end of its goal range.
“We expect to deliver good revenue growth in 2006, towards the upper end of our goal range. The majority of our businesses have performed well so far this year with our active innovation programme driving increased momentum across the group in the second quarter. We expect further growth in margins this year, although with continuing rises in oil prices it is unlikely that we will deliver margin growth within our goal ranges in 2006,”CEO Todd Stitzer said.
The company said that its year-to-date performance had shown healthy growth across key areas, with trade in Europe the Middle East and Africa picking up in the second quarter after a slow first quarter.
In the Americas, gum innovations increased Cadbury’s share of the gum market with the Trident brand benefiting from new products and new packaging formats. Trident also drove improved gum sales in Spain, the company said, boosted by the launch of Trident Splash.
In the UK, Green and Black’s strong growth helped to offset the poor performance of Cadbury Trebor Bassett. After a challenging start to the year, “the UK market is now modestly ahead and our performance is improving with share gains driven by Easter and a number of new product launches in the second quarter,” the company said. Easter also saw increased sales Ireland.
Cadbury’s performance in France, along with the emerging markets of Russia and South Africa, was disappointing. However, Cadbury reported good sales in the Asia Pacific region, driven by strong growth in the emerging markets of India, Thailand and Malaysia.
“For the year as a whole, we expect to deliver underlying business revenue growth towards the upper end of our goal range. Growth will be weighted towards the second half given the timing of new product activity,” Cadbury said in a statement. The company had previously set the target of 3% to 5% revenue growth for FY2006.
The company said that growth investments will be higher than last year, with projects including the opening of new science and technology centres in the US and Singapore and the strengthening route to market capabilities in the US, Mexico, India and Australia.
Despite pricing and cost reduction initiatives, Cadbury said that it is unlikely that it will deliver margin growth within its goal range of between 50 and 75 basis points, citing increasing commodity, oil and discount costs.