Good growth in base business revenue and a strong improvement in margin generated significant increases in underlying operating profit and earnings per share. In addition, exchange rate movements increased revenue by 10% and underlying operating profit by 16%, adding 35 basis points (bps) to underlying operating margin.
Cadbury’s revenue benefited from an improved trend in all three confectionery categories; growth in chocolate was strong throughout the half, and gum and candy reported positive growth in the second quarter. This was achieved despite cycling strong prior year comparatives, particularly for gum in the US and Europe, and for the Halls brand globally.
Overall base business revenue growth was 4%, reflecting price and mix benefits of around 6%. Cadbury continued to focus on eliminating product complexity through portfolio rationalisation, which, together with the effect of retail destocking (which was mainly in the US and limited to the first few months of the year) reduced revenue and volume for the half by around 1-2%.
Overall, for the first half, as in the first quarter, Cadbury’s main chocolate markets delivered strong growth and good market share gains, particularly in the UK. Throughout the period, there was increased demand for chocolate and bagged candies, the expected beneficiaries of a stay-at-home culture. At the same time, despite a softer start to the year, the more functional or ‘activity’-related products – for example, medicated candies and gum – started to deliver positive growth.
Revenue from focus brands benefited from a strengthened global category model and increased focus on fewer, bigger initiatives. Within chocolate, Cadbury Dairy Milk and Creme Egg performed well but were outshone by strong growth in other seasonal products and countline innovations.
In candy, The Natural Confectionery Co and Eclairs both performed strongly. For Halls, the largest candy brand in the world, first-half revenue declined overall, but improved in the second quarter after a slow start to the year. In gum, Trident, the world’s largest gum brand, grew well, reflecting strong growth in Brazil and other parts of Latin America. Hollywood grew market share but revenue declined as a result of the weak underlying French market.
Cadbury’s performance by market reflected the mix between chocolate, gum and candy (as described above), local market share gains and the relative impact of customer de-stocking. Market share progress was good overall. Based on the markets for which recent share data is available – representing nearly 85% of revenue – the company generated good market share growth in nearly 50% by revenue value, and held market share in a further 25%. Overall, focus markets grew by 5% and focus customers by 6%.
In emerging markets (38% of revenue in the half), revenue growth was good, up 7% in the half (up 6% in the first quarter, up 8% in the second quarter), led by strong performances in India, South Africa and South America. Trading in Russia and southeast Asia, improved toward the end of the period with Russia delivering growth for the half overall.
In developed markets (62%), revenue grew 2% with a much stronger second quarter (up 5%) offsetting the slow start to the year (first quarter unchanged), reflecting stronger growth in the UK and an improved performance in the US, which together more than offset the effect of weak market conditions in Europe.
Source: Cadbury
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