Description of Business
The business todayConfectioneryOur confectionery strategy is to significantly grow our share of the global confectionery market through organic growth and acquisition and by participating in the three categories of chocolate, sugar confectionery and gum. In 2004, we had the number one share of the global confectionery market (source: Euromonitor), having substantially grown share through expansion both geographically and in product participation. We believe that our strong positions in confectionery markets, by both geography and category, provide us with a robust platform for future growth. Our growth to date has been both organic and through acquisition, notably Wedel in Poland (1999), Hollywood in France (2000), Dandy in Scandinavia (2002) and Adams (2003). The US$4.2 billion (£2.7 billion) acquisition of Adams in 2003 transformed our position in the confectionery market worldwide. With turnover of around $2 billion on acquisition, a global market share of 24.7% in gum, a focus on the important markets of North and Latin America and a strong position in the growing markets of medicated confectionery, Adams significantly increased our confectionery scale, product range and geographic reach. At the time of acquisition, Adams had a significant market presence and operations in North, Central and South America which accounted for 75% of its sales. Key markets outside the Americas were the UK, Greece, Egypt, Japan and Thailand. Adams' sales were focused on a small number of global and regional brands, mainly in the gum and medicated sugar confectionery categories. With a number two share of the worldwide gum market, the acquisition added the Trident, Dentyne/Dentyne Ice, Chiclets and Bubbas range of gum and bubblegum brands to the Group. Halls is the number one sugar brand and the leading medicated brand worldwide (source: Euromonitor 2004). We now have the largest share of the global confectionery market at 10%, an increase of 40 basis points over the previous year (source: Euromonitor 2004). This compares with a market share of 5.3% in 2001. (source: Euromonitor) We have strong positions in many of the world's important confectionery markets: number one or two market shares in 24 of the top 50 (see table overleaf), and a leading market share in all of our geographic regions. |
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Main Confectionery Acquisitions and Disposals 1999 - 2006
We have also agreed to make the acquisitions shown in the table below. The acquisitions are expected to be completed in the first half of 2006.
Number of No.1 or No.2 Positions in the Top 50 Confectionery Markets by Geography
Source: Euromonitor 2004 Our confectionery turnover is generated from products spanning the full range of the market: chocolate, sugar and gum. The table below shows our leading market share in the global confectionery market and our shares in each of these three categories. Market Share in the Global Confectionery Market (US dollar share)
Source: Euromonitor 2004 The table below shows the change in percentage contributions to our confectionery turnover on both a product and a geographic basis between 1997 and 2005. In 1997, around 70% of our confectionery turnover was generated by chocolate; in 2005 this figure was around 45%, with 29% generated by gum, and 26% by other sugar products. In 1997, nearly 90% of our confectionery turnover was generated in EMEA and Asia Pacific, particularly in the UK and Australia. In 2005 EMEA accounted for just over half and the Americas just over a quarter, as compared with just over 10% in 1997. Sales Contribution by Product We have 67 (2004: 68) manufacturing facilities. Further details of these facilities are provided under Production assets. Our main confectionery brands are Cadbury, Bassett's, Dentyne, Halls, Hollywood, Stimorol, Dirol, Trebor, Trident and Wedel. Our brands have regional or local strengths, with the exception of Halls, which is sold in every one of our regions. Details of our main confectionery brands by region can be found under Regions. back to topBeveragesOur beverages strategy is to focus on strong regional beverages businesses. The business is concentrated in two regions: the Americas and Australia. In 1999, we sold our beverages businesses in around 160 countries to focus on those regions where we had or could build a sustained competitive advantage. The sale of our Continental European businesses was prevented by competition authorities, so we resolved instead to retain and build them through the acquisitions of La Casera, Orangina and Apollinaris & Schweppes. In 2005, we concluded that growth and returns could be better increased through continued focus and investment in our advantaged global confectionery business and American and Australian regional beverages operations rather than by further investment in Europe Beverages. Therefore, we decided it would be in the best interests of our shareowners to sell the Europe Beverages business. The sale for €1.85 billion was completed on 2 February 2006. In the Americas we operate a geographically cohesive business in the US, Mexico and Canada, entirely within the North America Free Trade Agreement (NAFTA) region, which generates high returns and cash flow. We have increased the scale of our operations and expanded our brand portfolio, particularly in the non-carbonated sector of the beverages market, through the acquisition of Snapple in the US (2000), the Orangina brand globally (2001), and Squirt in Mexico (2002). Following the sale of Europe Beverages, we sell the Orangina brand under licence in the US and licence our US non-carbonated brands in Europe. In Australia, the acquisition of the Pepsi Lion Nathan joint venture significantly strengthened our number two position in the Australian soft drinks market, both increasing our manufacturing scale and broadening our brand portfolio. Main Beverages Acquisitions and Disposals 2000 - 2006
In the Americas, the combination of our three North American businesses – Dr Pepper/SevenUp, Mott's and Snapple – into a single cohesive unit is enabling us to better leverage our powerful soft drinks brand portfolio, both flavoured carbonated (including Dr Pepper, 7 UP, Sunkist and A&W) and non-carbonated (including Snapple and Mott's). In 2005 we grew our share of the US carbonated soft drinks market, the world's largest, by 40 basis points to 17%. Together, our US beverages and confectionery businesses make us the 10th largest food supplier to the US grocery trade. Similarly in Australia, our combined confectionery and full system beverages businesses make us the fourth largest supplier of food products to the grocery trade. Details of our main beverage brands by region can be found under Regions. |
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