Cadbury Milking the gloom as profits jump 30%

There's nothing quite like chocolate to alleviate the recessionary gloom, judging by Cadbury's latest sales figures...

Last Updated: 14 Feb 2013

Chocolate-maker Cadbury said today that its sales were up 7% in 2008, with underlying pre-tax profits soaring 30% to £559m – a better-than-expected showing. CEO Todd Stitzer warned that the company wouldn’t be immune from the trouble ahead in 2009, but with sales and margins rising across all its major product lines, Cadbury is clearly in a better position than most. And it’s easy to see why: with the country in the grip of Peston-itis for much of last year, it’s no wonder we’re all being driven to comfort food.

Stitzer certainly had plenty to shout about today. During a year in which we all had plenty to chew on, gum sales were up 10%, including an 11% jump for Trident. Chocolate and candy were both up 6%, with sales of Dairy Milk (another ‘focus brand’) climbing 11% and the reintroduction of the much-loved Wispa (we ate £25m worth in the last four months of the year) also boosting sales. ‘In difficult times, people gravitate toward brands they know and love, and affordable treats,’ he told the FT today. And as well as cheering up doom-ridden Westerners, Cadbury has been going great guns in emerging markets: India and South Africa were the stars of the show, with sales rising 23% and 20% respectively.

Better still, at least as far as shareholders are concerned, is that Cadbury is managing to boost margins at the same time – despite a 40% hike in cocoa prices. Its profit margin rose from 10.1% to 11.9% last year, and Stitzer said today that it’s still well on course to meet its target of ‘mid-teens’ by 2011. This is partly due to higher chocolate prices (boo) and the divestment of its US drinks business, but also to savings from its so-called ‘Vision into Action’ scheme – one of the nicest-sounding cost-cutting and redundancy programmes we’ve ever come across.

But never let it be said that the confectioner is getting cocky. The never-ending doom and gloom from the financial pages might be driving us to the odd credit Crunchie, but Stitzer warned that it would make life difficult even for Cadbury. The company would ‘not be immune from the continued weak economic environment,’ he said today – it was ‘recession-resilient rather than recession-proof’, which was likely to mean sales growth coming in ‘around the lower end of our 4-6% goal range’.

Still, it’s clear that this is a good business to be in during a year when more and more of us will be looking for cheap treats (same goes for Heinz, which has just reported an 11% rise in quarterly profits - it's cold Baked Beanz all round for dinner these days). Relatively speaking, Cadbury’s must be feeling pretty optimistic. A glass and a half full, you might say.

In today's bulletin:
Cadbury Milking the gloom as profits jump 30%
Sir Philip Green to merge Arcadia and Bhs
Airports and trains struggle as passenger numbers drop
SMEs stamp their feet over Royal Mail sale
Non-exec directors getting more for less

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