When the Cadbury Schweppes board opened an envelope from Peltz yesterday, they were probably expecting it to contain something with glitter on the front and a picture of Santa Claus. Instead, it housed a string of not-very-friendly demands from his investment vehicle Trian, suggesting that Cadbury needs to raise its profit margins to the same level as its best-performing peers.
Cadbury has already promised to try and boost confectionery margins from 10% to something in the ‘mid-teens’. However, Peltz reckons that’s not good enough – it should be shooting for the ‘high teens’, as per the likes of Hershey and Wrigley.
Peltz has a 4.5% stake and a history of activism, so he could kick up quite a fuss if the board won’t play ball – particularly since his recent tie-up with the deep-pocketed Qatar Investment Authority. Trian’s letter to the board said that if progress wasn’t achieved, it would become ‘significantly more active in evaluating all of our alternatives as a large shareholder’ – which as threats go, is about as subtle as a brick.