Cadbury-Schweppes: Wikis

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Cadbury plc
Type Subsidiary of Kraft Foods
Founded 1824
Headquarters Uxbridge, London,
United Kingdom
Key people Irene Rosenfeld
Chairwoman & CEO
Kraft Foods Inc.
Industry Confectionery
Products See list of Cadbury products
Revenue GB£5,384 million (2008)
Operating income GB£388 million (2008)
Net income GB£364 million (2008)
Employees 71,657 (2008)[1]
Parent Kraft Foods
Website www.cadbury.com

Cadbury is a British-based confectionery company, the industry's second-largest globally after the combined Mars-Wrigley.[2] Headquartered in Uxbridge, England and formerly listed on the London Stock Exchange, Cadbury was acquired by Kraft Foods in March 2010. The company was an ever-present constituent of the FTSE 100 from the index's 1984 inception until its 2010 takeover.[3][4]

The firm was known as "Cadbury Schweppes plc" from 1969 until a May 2008 demerger, which saw the separation of its global confectionery business from its U.S. beverage unit, which has been renamed Dr Pepper Snapple Group Inc.[5]

Contents

History

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Early history

In 1824, John Cadbury began vending tea, coffee, and drinking chocolate, which he produced himself, at Bull Street in Birmingham, England. John Cadbury later moved into the production of a variety of Cocoas and Drinking Chocolates being manufactured from a factory in Bridge Street, supplying mainly to the wealthy due to the high cost of manufacture at this time. During this time a partnership was struck between John Cadbury and his brother Benjamin. At this time the company was known as 'Cadbury Brothers of Birmingham'.[6]

The two brothers opened an office in London and in 1854 received the Royal Warrant as manufacturers of chocolate and cocoa to Queen Victoria. Around this time in the 1850s the industry received a much needed boost with the reduction in high import taxes on cocoa; this allowed chocolate to become more affordable to everyone.

Due to the popularity of a new expanded product line, including the very popular Cadbury's Cocoa Essence, the company's success led to the decision in 1873 to cease the trading of tea. Around this time, master confectioner Frederic Kinchelman was appointed to share his recipe and production secrets with Cadbury, which led to an assortment of various chocolate covered items.

In 1878, John Cadbury's sons Richard and George (who had taken over the company after John Cadbury's retirement in 1861), acquired the Bournbrook estate, comprising fourteen and a half acres of countryside five miles south of the outskirts of Birmingham. They renamed the Bournbrook estate to Bournville and opened the Bournville factory in 1879.

In 1893, George Cadbury bought 120 acres (49 ha) of land close to the works and planned, at his own expense, a model village which would 'alleviate the evils of modern more cramped living conditions'. By 1900 the estate included 313 cottages and houses set on 330 acres (130 ha) of land. As the Cadbury family were Quakers there were no pubs in the estate;[7] in fact, it was their Quaker beliefs that first led them to sell tea, coffee and cocoa as alternatives to alcohol.[8]

1900 to 1950s

In 1915 Cadbury's Milk Tray was first produced and throughout the First World War. More than 2,000 of Cadbury's male employees joined the Armed Forces. To support the war effort, Cadbury provided clothing, books and chocolate to soldiers. After World War I, the Bournville factory was redeveloped and mass production began in earnest. In 1918, Cadbury opened their first overseas factory in Hobart, Tasmania and in 1919 undertook a merger with J. S. Fry & Sons, another chocolate manufacturer which saw the integration of well-known brands such as Fry's Chocolate Cream and Fry's Turkish Delight.[6]

During World War II, parts of the Bournville factory were turned over to war work, producing milling machines and pilot seats. Workers ploughed football fields in which to plant crops. As chocolate was regarded as an essential food it was placed under government supervision for the entire war. The wartime rationing of chocolate ended in 1949, and normal production resumed. Cadbury subsequently built new factories and had an increasing demand for their products.[6]

Merger with Schweppes

The Cadbury Schweppes logo used until the demerger in 2008

Cadbury merged with drinks company Schweppes to form Cadbury Schweppes in 1969.[9]

Cadbury Schweppes went on to acquire Sunkist, Canada Dry, Typhoo Tea and more. In the US, Schweppes Beverages was created and the manufacture of Cadbury confectionery brands were licensed to Hershey's.

Snapple, Mistic and Stewart's (formerly Cable Car Beverage) were sold by Triarc to Cadbury Schweppes in 2000 for $1.45 billion.[10] In October of that same year, Cadbury Schweppes purchased Royal Crown from Triarc.[11]

Demerger

In March 2007, it was revealed that Cadbury Schweppes was planning to split its business into two separate entities: one focusing on its main chocolate and confectionery market; the other on its US drinks business.[12] The demerger took effect on 2 May 2008, with the drinks business becoming Dr. Pepper Snapple Group Inc.[5] Cadbury is selling its Australian beverage unit to Asahi Breweries.[13]

Recent developments

In October 2007, Cadbury announced the closure of the Keynsham chocolate factory, formerly part of Fry's. Between 500 and 700 jobs were affected by this change. Production transferred to other plants in England and Poland.[14]

In 2008 Monkhill Confectionery, the Own Label trading division of Cadbury Trebor Bassett was sold to Tangerine Confectionery for £58million cash. This sale included factories at Pontefract, Cleckheaton and York and a distribution centre near Chesterfield, and the transfer of around 800 employees.[15]

In mid-2009 Cadbury replaced some of the cocoa butter in their non-UK chocolate products with palm oil. Despite stating this was a response to consumer demand to improve taste and texture, there was no "new improved recipe" claim placed on New Zealand labels. Consumer backlash was significant from environmentalists and chocolate lovers. By August 2009, the company announced that it was reverting to the use of cocoa butter in New Zealand.[16] In addition, they would source cocoa beans through Fair Trade channels.[17]

Kraft buyout

On 7 September 2009 Kraft Foods made a £10.2 billion (US$16.2 billion) indicative takeover bid for Cadbury. The offer was rejected, with Cadbury stating that it undervalued the company.[18] Kraft launched a formal, hostile bid for Cadbury valuing the firm at £9.8 billion on 9 November 2009.[19] Business Secretary Peter Mandelson warned Kraft not to try to "make a quick buck" from the acquisition of Cadbury.[20] On 19 January 2010, it was announced that Cadbury and Kraft Foods had reached a deal and that Kraft would purchase Cadbury for £8.40 per share, valuing Cadbury at £11.5bn (US$18.9bn). Kraft, which issued a statement stating that the deal will create a "global confectionery leader", has had to borrow £7 billion (US$11.5bn) in order to finance the takeover.[21]

The Hershey Company, the Pennsylvania chocolate company, which reportedly shares Cadbury's "ethos",[22] had expressed an interest in buying Cadbury because it would broaden its access to faster-growing international markets.[23] But on 22 January 2010, Hershey announced that it will not counter Kraft's final offer.[24][25][26] Hershey already manufactures and distributes Cadbury-branded chocolate (but not its other confectionery) in the United States.

The acquisition of Cadbury faced widespread disapproval from the British public, as well as groups and organisations including trade union Unite[27], who fought against the acquisition of the company which, according to Prime Minister Gordon Brown, is very important to the British economy.[28] Unite estimated that a takeover by Kraft could put 30,000 jobs "at risk",[29][30][22] and UK shareholders protested the M&A advisory fees charged by banks. Cadbury's M&A advisers are UBS, Goldman Sachs and Morgan Stanley.[31][32][33] RBS, a bank 84% owned by the United Kingdom Government, is controversially funding the Kraft takeover.[34][35]

On 2 February 2010, Kraft secured over 71% of Cadbury's shares thus finalising the deal. [36]Kraft had needed to reach 75% of the shares in order to be able to delist Cadbury from the stock market and fully integrate it as part of Kraft. This was achieved on 5 February 2010, and the company announced that Cadbury shares would be de-listed on 8 March 2010.[37]

On 3 February 2010, the Chairman Roger Carr, chief executive Todd Stitzer and chief financial officer Andrew Bonfield all announced their resignations. Stitzer had worked at the company for 27 years.[38]

On 9 February 2010, Kraft announced that they plan to close the Cadbury factory at Keynsham near Bristol with the loss of 400 jobs.[39] The management explained that existing plans could not realistically be reversed, though assurances had been given regarding sustaining the plant. Production is to move to Poland. Staff at Keynsham have criticised this move, suggesting that they feel betrayed and as if they have been "sacked twice." [40]

Operations

United Kingdom

Cadbury plc also owns Trebor Bassett, Fry's, Maynards and Halls. The confectionery business in the UK is called Cadbury UK (formerly Cadbury Trebor Bassett) and, as of August 2004, had eight factories and 3,000 staff in the UK. Biscuits bearing the Cadbury brand, such as Cadbury Fingers, are produced under licence by Burton's Foods. Ice cream based on Cadbury products, like 99 Flake, is made under licence by Frederick's Dairies. Cadbury cakes and chocolate spread are manufactured under licence by Premier Foods, but the cakes were originally part of Cadbury Foods Ltd with factories at Blackpole in Worcester and Moreton on the Wirral with distribution depots throughout the UK.

Ireland

Cadbury Ireland Limited is a confectionery company in Ireland based in Coolock in Dublin.

United States

Cadbury plc's presence in the United States consists of the confectionery unit Cadbury Adams, manufacturers of gum and mints but not chocolate. Cadbury merged with Peter Paul in 1978.[41] Ten years later Hershey's acquired the chocolate business from Cadbury's.[41] Accordingly, although the Cadbury group's chocolate products have been sold in the US since 1988 under the Cadbury name, the chocolate itself has been manufactured by Hershey's and can be found in Hershey's chocolate stores. Prior to the May 2008 demerger, the North American business also contained beverage unit Cadbury Schweppes Americas Beverages. In 1982, Cadbury Schweppes purchased the Duffy-Mott Company.[42]

Australasia

Cadbury also operate four Australasian confectionery factories; two in Melbourne, Victoria (Ringwood and Scoresby), one in Hobart, Tasmania (Claremont), and one in Dunedin, New Zealand. The Claremont factory was once a popular tourist attraction and operated daily tours; however the factory ceased running full tours mid-2008, citing health and safety reasons.[43] Cadbury Schweppes has been upgrading its manufacturing facility at Claremont, Tasmania, Australia, since 2001 [44]

Executive compensation

In 2008 Todd Stitzer, Cadbury's CEO, was paid a £2,665,000 bonus. Combined with his annual salary of £985,000 and other payments of £448,000 this gives a total remuneration of over £4 million.[45]

Accounting

In July 2007, Cadbury Schweppes announced that it would be outsourcing its transactional accounting and order capture functions to Shared Business Services (SBS) centres run by a company called Genpact, (a businesses services provider) in India, China, and Romania. This was to affect all business units and be associated with U.S. and UK functions being transferred to India by the end of 2007, with all units transferred by mid-2009. Depending on the success of this move, other accounting Human Resources functions may follow. This development is likely to lead to the loss of several hundred jobs worldwide, but also to several hundred jobs being created, at lower salaries commensurate with wages paid in developing countries.[46]

Products

Cadbury plc manufactures chocolates and sweets such as the popular Cadbury Dairy Milk.

Notable product introductions include:

Health and safety

2006 Salmonella scare

On 19 January 2006, Cadbury Schweppes detected a rare strain of the Salmonella bacteria, affecting seven of its products, said to have been caused by a leaking pipe. The leak occurred at its Marlbrook plant, in Herefordshire, which produces chocolate crumb mixture; the mixture is then transported to factories at Bournville and Somerdale to be turned into milk chocolate.[47]

Cadbury Schweppes did not officially notify the Food Standards Agency until 19 June 2006, shortly after which it recalled more than a million chocolate bars.[47]

In December 2006, the company announced that the cost of dealing with the contamination would reach £30 million.[48][49]

In April 2007, Birmingham City Council announced that it would be prosecuting Cadbury Schweppes in relation to three alleged offences of breaching health and safety legislation. An investigation being carried out at that time by Herefordshire Council led to a further six charges being brought.[48] The company pleaded guilty to all nine charges,[50][51] and was fined 1 million pounds at Birmingham Crown Court—the sentencing of both cases was brought together.[52] Analysts have said the fine is not material to the group, with mitigating factors limiting the fine being that the company quickly admitted its guilt and said it had been mistaken that the infection did not pose a threat to health.[52]

2007 recalls

On 10 February 2007, Cadbury announced they would be recalling a range of products due to a labelling error. The products were produced in a factory handling nuts, potential allergens, but this was not made clear on the packaging. As a precaution, all items were recalled.[53]

On 14 September 2007, Cadbury Schweppes investigated a manufacturing error over allergy warning, recalling for the second time in two years thousands of chocolate bars. A Printing mistake at Somerdale factory resulted in the omission of tree nut allergy labels from 250 g Dairy Milk Double Chocolate bars.[54]

2008

On 29 September 2008 Cadbury withdrew all of its 11 chocolate products made in its three Beijing factories, on suspicion of contamination with melamine. The recall affected the mainland China markets, Taiwan, Hong Kong and Australia.[55] Products recalled included Dark Chocolate, a number of products in the 'Dairy Milk' range and Chocolate Éclairs.[56]

2009 Hydrogenation

Cadbury continues to use hydrogenated oils in many of its signature products. Although trans fats are present, the nutrition labels round the values down to zero.[57]

See also

References

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  51. ^ Cadbury admits salmonella chargesBBC News, 3 July 2007.
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  53. ^ Cadbury recall Easter eggs Daily Mail, 10 February 2007
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