In January 2010, after months of fierce negotiations, Kraft Foods Inc., the world's second-largest food company, acquired the world's largest confectioner, Cadbury plc, for an estimated $18.6 billion. Globally, the group is number one in the chocolate and sugar confectionery segments and a strong number two in the high-growth gum segment. Cadbury plc's leading brands, such as Cadbury, Trident and Halls, are highly complementary to Kraft's portfolio and benefit from its global scope, scale and array of proprietary technologies and processes. In addition, the acquisition of Cadbury significantly enhanced the strength of Kraft's presence in the confectionery market, enabling Kraft to leverage Cadbury's product development capabilities.
Established in 1824, Cadbury is the world's largest confectionery company by market share. The company has an estimated 10% share of the international confectionery market and employs more than 50,000 staff in 60 countries worldwide. Cadbury merged with Schweppes, a mineral water business, in 1969 to become Cadbury Schweppes plc. However, on 7 May 2008, the company finalised the separation of its confectionery business from the Americas Beverages business. The demerger followed a series of disposals by the company during 2007, which were intended to streamline operations. Cadbury Schweppes Australia Ltd was a wholly owned subsidiary of UK-based Cadbury plc. However, in 2009 Cadbury's Australian Schweppes beverage business was sold to Asahi Breweries for an estimated $1.2 billion.
The company has a well-entrenched position in the Australian market, with its flagship production facilities located in Claremont, TAS, and Ringwood, VIC. Cadbury owns several iconic chocolate and confectionery brands including Cherry Ripe, Crunchie, Freddo, Roses and Dairy Milk. These brands are household names and enjoy a high level of customer loyalty. Sustained new product introductions, such as Boost, Time Out and Breakaway, have also stimulated demand and consumption.
In 2011, results published at the group level reveal that net revenue increased 1.2%, driven by higher pricing and the continuing effects of the Cadbury acquisition. New product introductions such as the launch of Cadbury Dairy Milk Mousse, which targeted the premium and indulgent segment, further cemented the notion that producers within the industry are bucking the recessive trend and concentrating their products at the higher end of the market.
Given the recessive climate that dampened spending and confidence over 2009, revenue decreased 6.8% to $576.4 million. Consumers sought respite from the gloom through simple and inexpensive indulgences such as chocolate and confectionery. Cocoa and sugar prices eased, while new product introductions helped sales volumes. NPAT grew dramatically, driven by lower production costs and greater volumes of high-margin indulgent products.
In 2008, sales revenue decreased 6.3% to $618.7 million, despite world cocoa prices increasing 37.9% during the year. Growth in the Asia-Pacific region, inclusive of Australia, was driven by strong growth in the emerging markets of India and China. The deteriorating economic climates in Japan, Australia and New Zealand, however, partially offset the gains. Cost-cutting initiatives occurred during the year, with the closure of 10 of the company's manufacturing sites and the corresponding downsizing of the workforce. In addition, Cadbury announced a $135 million proposal to improve the productivity and efficiency at its chocolate manufacturing sites in Tasmania, Victoria and New Zealand.
Source: IBISWorld Industrial Report 2012
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