Cadbury has warned of slower growth and falling retail stocks as the economic downturn starts to bite into the chocolate-eating and gum-chewing habits of consumers.
The Bournville-based company, maker of Dairy Milk chocolate, Trident gum and Halls cough drops, said that with weakening economic conditions in the fourth quarter, some markets like continental Europe and North America were seeing slower growth.
“Consumers are still eating more chocolate and chewing more gum, but not across as many markets,” said chief executive Todd Stitzer.
The group disappointed investors by saying it expected its revenue growth in 2008 to be at the top end of a medium-term target range of four per cent to six per cent and to see modest margin improvement for the year.
Many analysts had looked for seven per cent growth after Cadbury reported a similar revenue rise for the first nine months of 2008 as it pushed through big price rises for chocolate and gum.
Cadbury shares dipped two per cent to 546p at one stage during Tuesday. The shares had outperformed the FTSE 100 by 20 per cent and traded in line with DJ Euro food and beverage industry so far this year.
“With nine-month 2008 sales up seven per cent, we had hoped for an upgrade on at least the revenue line,” said analyst Jeff Stent at brokers Citi.
Credit Suisse analyst Charlie Mills added: “Taken literally a six per cent organic growth rate suggests a slower fourth quarter since the group was running at seven per cent after nine months.’’
Mr Stitzer called trading “reasonably robust” but admitted that, “consumers in Europe are journeying out less frequently and this is reflected in a more conservative attitude from our retail customers”.
He reiterated that the group expects a six per cent to eight per cent rise in input costs for 2009 and remained committed to delivering its mid-teen percentage margin target by 2011 and looked to make further progress towards that goal in 2009.
Cadbury is looking to match market forecasts for 2008 operating margins and see a 130 basis percentage points rise to 11.1 per cent compared with 2007’s margin of 9.8 percent.
The group also announced that Andrew Bonfield will take over as chief financial officer (CFO) from Ken Hanna when he retires in April 2009.
Mr Bonfield, 46, was most recently CFO at U.S. drugs group Bristol-Myers Squibb. Bonfield comes with 10 years experience as a CFO including eight years at two of the world’s biggest drugs groups, Bristol-Myers and also SmithKline Beecham before it merged with Glaxo. He was also director of finance at gas and oil producer BG Group.
Cadbury added it had decided to sell its Australian Beverage business, and the separation of this unit from its Australian confectionery business was well advanced. Analysts have valued the Australian drinks unit about £400 million.
Cadbury, which spun off its North American beverage business Dr Pepper Snapple in May, lost its crown as the world’s largest confectionery group when US-based Mars completed its takeover of chewing gum group Wrigley earlier this month.