If you’ve ever thought that Cadbury Schweppes was a cumbersome title, how about Dr Pepper Snapple Group? Better get used to it, because that is what the present Cadbury Schweppes Americas Beverages (CSAB) unit will be called, when it is spun off from Cadbury’s vast confectionery empire in 2008.
Cadbury once hoped to sell CSAB outright to private equity groups, but the collapse of world debt markets meant that equity groups could no longer raise the necessary cash for a buyout – CSAB was valued by analysts at up to $16 billion. So instead Americas Beverages will be ‘demerged’ from the core confectionery business, with Cadbury stockholders receiving shares in the new enterprise, which will be floated on the New York Stock Exchange by the end of June.
These latest details were revealed in December, when Cadbury Schweppes issued a trading update in advance of its year end results. The news from the group’s confectionery operations was good, with sales set to rise more than 6%. But the news from CSAB was mixed.
Although beverage sales were expected to grow 4-5% over 2007, the unit’s profitability will be hit by a £30 million ($61 million) loss from the botched launch of the sports drink Accelerade. Chief Financial Officer Ken Hanna admitted the company ‘got it wrong’ with Accelerade, which will be placed in fewer retail outlets in future.
While Dr Pepper and Snapple are key brands in CSAB’s portfolio (hence the tongue twisting name for the drinks business spin off), the unit makes a wide range of beverages including juice and water. CSAB’s market share is a relatively modest 17%, but it is America’s third biggest beverage group after Coca-Cola and PepsiCo.
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