£500m sweet spree for Cadbury

PROFITS at Cadbury Schweppes surged 10% in the first half of the year despite slack demand for its drinks in the US and a huge fall-off in confectionery sales to troubled Argentina.

Cost savings and extra marketing clout behind its newly-combined Cadbury Trebor Bassett chocolate and confectionery business in Britain made the division its star performer behind group pre-tax profits of £386m in the six months to 16 June, up from £351m a year earlier.

But in the US, a combination of weather-related poor demand and disruption caused by Pepsi Bottling Group's decision to ditch 7 Up took a heavy toll. Pepsi's move means Cadbury is having to strike new deals with independent distributors and transfer the bottling process.

Group chief executive John Sunderland said in the long run the transfer would benefit the company as 7 Up would be far more important to the independent bottlers than to the giant PBG.

He said: 'While there will be some disruption and loss of volume in the first year, that is only in the short term. The independents will be far more focused.' He said much of the overall group profit growth came from new acquisitions. In the past six months alone, he has spent £500m on companies ranging from a sweets business in Turkey to the fourth-largest chewing gum manufacturer in the world.

The £201m takeover of Dandy's chewing gum operations, which include the Stimorol brand, is the most recent deal and is currently going through the monopoly regulators.

Sunderland said he was still interested in further deals but had nothing immediately on the radar. Cadbury has been mentioned as a possible bidder for Pfizer's Adams confectionery arm, which includes Halls lozenges and Trident gum.

In Britain, Sunderland pumped an extra 6% into Cadbury Trebor Bassett's marketing budget and has told his executives there to come up with more new products. Recent launches including the Cadbury chocolate Brunch Bar and Dream white chocolate got off to a strong start. The Cadbury brand is one of the main sponsors of next week's Commonwealth Games.

Globally, marketing expenditure for the first half was £267m, an increase of 9% on last year's first half at constant exchange rates. Overall turnover was £2.35bn against £2.2bn last time while the interim dividend goes up from 3.35p to 3.5p.