Sour note for sweet maker

There are two ways to look at this morning's news that Cadbury Schweppes is to shed 7,500 jobs globally - a 15% cut in total employee numbers. For pessimists it's a sign that last year's unhappy salmonella scare - which cost the firm £30m to handle - continues to wreak a degree of havoc completely out of proportion with its actual negligible impact on public health. For optimists, it's simply an indicator of good, pro-active management - the firm is acting to do unto itself what any potential private equity buyer would in the event of acquiring it.

Last Updated: 06 Nov 2012

But even with the best will in the world, it's impossible to deny that Cadbury -a decently run operation which benefits from that great rarity, a boss who always at least tries to do the right thing - has had a pretty torrid time of it recently. After the salmonella incident came the real catalyst of this latest bout of restructuring - the dawn raid by aggressive US investor-activist Nelson Peltz which forced the company to agree to hive off its valuable US drinks business. And finally the well-meant but defeatist announcement that the firm is to abandon its small but very swanky Mayfair administrative HQ in favour of a new home in the ghastly outer London wilderness of Uxbridge. The chances of persuading the capital's great and good to make the trip west for a cup of drinking chocolate and a bit of light lobbying are slim indeed.

The drinks unit sale may yield as much as £7bn - that's a lot of Dr Pepper - and boost profit margins from 10% to a much chunkier 15%, to boot. Hence the Peltz armlock. But ditching the Schweppes part to become just plain old Cadbury creates a smaller business, and one much more readily digestible by the big beasts of the private equity jungle. Cadburys clearly has a powerful wish to remain publicly listed and is defending itself against takeover by seeking the kind of operational efficiencies announced today.

Whichever way you lean, the undeniably good news for investors - and indirectly for the economy as a whole - is that the long-term profits from this short-term pain will accrue to the many, in the form of shareholders and pension funds, rather than to a few mega-rich partners in a shadowy private equity firm somewhere.

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