Cadbury is looking to launch a series of gum lines in the US and the UK this year in a bid to boost sales, the confectionery giant’s CEO said today (25 February).
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Speaking at the publication of Cadbury’s 2008 results, Todd Stitzer said 2009 would be “an important year” for product innovation from the company’s gum portfolio, which includes the Trident brand.
Cadbury saw revenue from its gum business rise by 10% last year, although the economic downturn weighed on the category as a whole in certain markets, particularly the UK, where gum sales fell 8%.
Stitzer said gum sales had suffered as the downturn meant people travelled less often. Conversely, he said, chocolate sales had been boosted as consumers stayed at home and treated themselves.
In a bid to boost gum sales, Stitzer said Cadbury would look to introduce new lines on both sides of the Atlantic.
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By GlobalData“The gum market is driven by innovation and marketing and we aim to continue that in 2009,” Stitzer said.
The product launches will come as Cadbury continues to revamp its product portfolio across the globe. In recent months, the confectioner has looked to stop producing “low-margin” products, including lines in Egypt and in certain European markets.
The SKU rationalisation programme, combined with rising sales across chocolate, gum and candy, helped drive profit and margin gains in 2008.
Cadbury booked a 15% jump in revenue to GBP5.38bn (US$7.8bn), helped in part by the weakness of sterling but also by rising prices and a 1% gain in volumes. At constant currencies, revenue was up 6%.
Rising sales across Cadbury’s four regional divisions drove an increase in underlying profits in 2008. The company said profit from operations rose from GBP278m in 2007 to GBP388m last year.
On an underlying basis, operating profit rose 35% to GBP638m – an increase of 22% after foreign exchange fluctuations.
Underlying operating margins rose by 150 bps at constant exchange rates, as Cadbury drove efficiencies across the business and saw its performance in emerging markets like Russia, Nigeria and China improve.
Looking to 2009, Cadbury said it expected annual sales to grow at the “low end” of its 4-6% growth target.
Crucially, Cadbury added that the company would move towards meeting its 2011 “mid-teens” margin target – a goal the business set when it laid out plans to de-merge its drinks operations from its confectionery arm in 2007.
A possible pressure on margins could be the rising price of cocoa, which reached a 23-year high last month.
Ken Hanna, Cadbury’s outgoing CFO, said cocoa prices had risen by 40% year-on-year in 2008 but insisted the company had already covered the higher cost through price increases.
“We have taken sufficient pricing already in 2009 to cover input cost pressures,” Hanna said.
Shares in Cadbury were up 3.9% at 528.5p at 16:46 this afternoon.
