cadbury

Running head: Case Study Cadbury Schweppes: Capturing Confectionery







Case Study: Cadbury Schweppes: Capturing Confectionery
ORM 680: Capstone in Strategic Management
Spring Arbor University
Jaspreet Kaur (Jas)
Terry A. O’Connor, Ph.D.
September 6, 2010







Abstract
Cadbury Schweppes formed its joint venture in 1969. The company went through several mergers and acquisitions from 1969 to 2008, but the company was able to survive and became the global leader in confectionery and soft drink business. In the early stage, the company had to struggle but by the late 1900’s Cadbury Schweppes started to expand its business worldwide. The company had franchises in United States and Europe and acquired various businesses in other parts of the world. By the early 2000’s the company decided to demerger. In 2008, the beverage site of the business (Schweppes) became Dr Pepper Snapple Group and confectionery (Cadbury) was bought by Kraft Foods the very next year.










Cadbury Schweppes: Capturing Confectionery
Introduction
The purpose of this document is to analyze the existence of Cadbury Schweppes. This paper will describe the history and background of the company. In addition, the document will identify and discuss the global initiatives of Cadbury Schweppes. And finally, the document will discuss the recommendations for the corporation.
History and Background
Cadbury Schweppes began its journey in 1969 with the merger of a beverage company started by Jacob Schweppe in 1783 in Geneva, Switzerland and a chocolate business started by John Cadbury in Birmingham, U.K. in 1824 (Hill and Jones, 2010, p. C311). Cadbury Schweppes was the world’s oldest profitable family owned business till the early 2000’s. With origins stretching back over 200 years, Cadbury Schweppes became the international beverage and confectionery company employing over 40,000 people. Working together to create brands people love, company’s portfolio included well-known favorites Cadbury, Schweppes, Dr Pepper, 7 UP, Snapple, Orangina, Hollywood, Stimorol, Trebor and Bassett, enjoyed in almost 200 countries around the world. Cadbury Schweppes was listed in the stock exchange of London (CBRY) and New York (CSG) (victoryseeds.com). In May of 2008, both the Cadbury and Schweppes declared the demerger of the Cadbury Schweppes PLC.
Cadbury, 1824-1969
John Cadbury was the founder of Cadbury chocolates business. In 1824, he opened up his grocery business in Birmingham. The main focus of the business was to market drinking cocoa and chocolate products. By 1847, John Cadbury took on a partnership with his brother Benjamin and began manufacturing cocoa products. Although the concept of their business was new and innovative but unfortunately the profit margin was very low. In 1860, due to declining profit margin; both the brothers decided to dissolve the partnership. As a result, Benjamin left the company; John took retirement, and left the business with his two sons, George and Richard. By 1866, the new Cadbury brothers introduced an improved process for pressing cocoa butter out of the cocoa bean to produce cocoa essence (answers.com). From 1866 – 1964, the company acquired various businesses in the chocolate industry and went globally. In 1964 Cadbury entered the sugar-candy business when it acquired confectioner Pascall Murray and by 1969, the company merged with Schweppes (answers.com).
Schweppes, 1783-1969
Jacob Schweppes, a German born jeweler and an amateur chemist began his company Schweppes in 1783. Through the 1700’s to mid 1800’s Schweppes entered into several joint ventures and mergers. In 1870’s the company introduced tonic water, ginger ale, and lemonade; which was a huge success for Schweppes. The era of 1900’s gave company the strength to expand its business overseas. In 1960, it acquired three makers of jams and jellies: Hartley's, Moorhouse, and Chivers. These acquisitions required substantial reorganization, however, and did not work out very well; by 1964 only Hartley's was turning a profit for its parent company. Nonetheless, Schweppes prospered under Sir Frederick Hooper's guidance. Its annual profits increased nearly sevenfold between 1953 and 1962, from $756,000 to $4.8 million (answers.com). In 1964, Hooper got retired from the company and Harold Watkinson took over the leadership of Schweppes Corporation. In 1969, Schweppes signed an agreement with Cadbury and bought its shares to merge with the company.
Cadbury Schweppes, 1969-2008
The year 1969, brought two companies; Cadbury and Schweppes together to run the soft drink and chocolate business around the globe. Under the agreement, the new company was named “Cadbury Schweppes”. Harold Watkinson was appointed as the CEO and Adrian Cadbury became the deputy chairman of the company. While Schweppes was best known for its mixers, such as tonic water, the firm was the number three competitor in the beverage business after Coca-Cola and PepsiCo. Cadbury was the number four player in the global chocolate business, having exited related businesses such as biscuits (cookies) in a restructuring, in the 1980’s. The company introduced several new brands in the beverage site such as: Canada Dry and Sunkist (1986), Dr. Pepper and Seven-Up (1995), and Orangina (2001), Hawaiian Punch (1999), and Snapple in 2000. In confectionery, the firm acquired non-chocolate businesses such as: Trebor, Bassett, and Hollywood, its first chewing gum acquisition in 2002 (Hill and Jones, 2010, C311). In early 2002, Cadbury Schweppes acquired Danish Company, Dandy; to expand its business into gum market. The company invested $307 million dollars in the acquisition.
From 1969 to 2008, Cadbury Schweppes acquired many beverage and confectionery businesses around the globe. Due to the new and innovative products, the company was able to expand its business and gain customer confidence. The company’s soft drink products became the hit in the market due to the high carbonate as compare to other competitors in the industry. In the confectionery site of the business, Cadbury Schweppes was able to produce variety of chocolates which created a huge demand for their products. The company had both positive and negative experiences throughout these years. Many times company was able to produce profit margin and positive growth rate but there were several incidents where the company was struggling. Finally, in 2008; the company announced its demerger and shocked the management, employees, customers, and shareholders.
Demerger
In 2008, Cadbury Schweppes declared its demerger. The drinks business became Dr. Pepper Snapple Group Inc. and the chocolate and confectionery business was acquired by Kraft Foods the very next year.
Global Initiatives of Cadbury Schweppes
Cadbury Schweppes began to expand its business at international platform by late 1900’s. The company acquired businesses in Europe as well as in United States. In Asia, Cadbury Schweppes was able to develop its business with the help of British Colonies. In 1980’s the company focused on opening and acquiring businesses in both confectionery and soft drink in many nations including France, Australia, Spain, India, United States, and United Kingdom. In United States, the company acquired Peter Paul confectionery business for $58 million and Duffy-Mott, producer of fruit juices for $60 million. Both the companies gave Cadbury Schweppes competitive advantage over other competitors and gave company large amount of candy and soft drink share in the U.S. market. With the continuous growth, the company acquired Chocolat Poulain confectionery for $173.1 million in France and sold its confectionery business to Hershey’s in United States as a franchise.
The acquisition of Adams from Pfizer changed company’s portfolio positively. Cadbury Schweppes became the leader of confectionery business worldwide. The company was able to hold about 26% of chewing gum market share in the global market. The acquisition comprises the principal brands, including Halls, Trident, Dentyne/Dentyne Ice, the "Bubbas", Clorets, Chiclets and Certs, together with other functional confectionery products, manufacturing facilities and international sales, distribution and support networks. As per John Sunderland, CEO of Cadbury Schweppes; Adams gave us confectionery market leadership and a unique portfolio with an offering in every confectionery category. It brought powerful brands, access to new geographies and significant scale in the fastest growing confectionery sectors. Cost and revenue synergies, and the opportunity to drive the business within a global confectionery group, it created significant value for our shareowners”, (victoryseeds.com).
Principal Subsidiaries of Cadbury Schweppes
Schweppes France; Schweppes Spain; Schweppes Belgium; Schweppes Portugual; Cadbury Aguas Minerales (Mexico); Cadbury TreborBasset; Cafe Cadbury; Cadbury France; Hollywood (France); Cadbury Dulciora (Spain); Cadbury Portugal Productors de Confeitaria LSA; Piasten Schokoladenfabrik Hofmann (Germany); Cadbury Wedel (Poland); Cadbury O.O.O. (Russia); Cadbury Netherlands BV; Cadbury Ireland; Dr Pepper/Seven Up, Inc. (U.S.A.); Mott's (U.S.A.); Snapple Beverages Group (U.S.A.); Cadbury Trebor Allan (Canada); Jaret International (U.S.A.); Cadbury Stani (U.S.A.); Cadbury Schweppes Pty Ltd. (Australia); Cadbury Food Co. Ltd. China; Cadbury Food Co. Beijing (China); Trebor Wuxi Confectionery Co. (China); Cadbury Four Seas Co. Ltd. (Hong Kong); PT Cadbury Indonesia; Cadbury Japan Ltd.; Cadbury Confectionery Malaysia Sdn Bhd; Cadbury Confectionery Limited (New Zealand); Cadbury Philippines; Cadbury Singapore PTE Limited; Cadbury Schweppes (South Africa); Bromor Foods (South Africa); Cadbury Kenya; Cadbury Ghana; Cadbury Nigeria; Cadbury Egypt; Cadbury India Ltd (answer.com).
Recommendations for Cadbury Schweppes
Cadbury Schweppes are no longer existed as a joint venture. The Cadbury was bought by Kraft Foods and the Schweppes became Dr Pepper Snapple Group. Although the company does not have combined market name but the consumers still have trust and desire in their products. Since, the company Cadbury Schweppes was in business from several decades; consumers are able to differentiate the taste of their products. With that said, it is my recommendation that both the companies, Kraft Foods and Dr Pepper Snapple Group; should concentrate on keeping the same ingredients in their products so that they don’t lose the existing customer base and in order to attract the new customer base, both the companies should invest in their R&D for better product outcome.
Conclusion
All in all, Cadbury Schweppes was formed with the idea to bring new products in the industry as well as become the global leader in confectionery and soft drink business. The company’s journey began with a merger between Schweppes and Cadbury. Schweppes was best known in the business of soft drinks and the Cadbury was popular for its chocolate business. By 1969, both the company’s decided to merge together to become the global power in confectionery and soft drink industry. Within the few years, the company acquired many businesses around the globe in order to expand its horizons. By the late 1900’s the company had over 26% of market share in the candy industry in United States. Moreover, the company grew tremendously in other parts of the world.
By the 2000’s, Cadbury Schweppes decided to demerge its business line by splitting the beverage and confectionery business. In 2008, the Schweppes became Dr Pepper Snapple Group (DPS) and the Cadbury was bought by Kraft Foods. Overall, today both the DPS and Kraft Foods are one of the favorite food and soft drink companies rated by consumers.
















References

Answers.com. Retrieve September 4, 2010 from http://www.answers.com/topic/cadbury-schweppes-plc-adr#Merger_with_Schweppes
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Victoryseeds.com. Retrieve September 5, 2010 from http://www.victoryseeds.com/candystore/confectioners/pr/pr_cadbury_adams_121702.htm