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December 18, 2007

The Board of Directors
Cadbury Schweppes plc
25 Berkeley Square
London W1J 6HB
UK
Dear Board Members:
Investment funds and accounts managed by Trian Fund Management, L.P. (collectively,
“Trian”) own interests in approximately 4.5% of the outstanding shares of Cadbury Schweppes
plc (“Cadbury” or “the Company”). Trian has recently increased its position from approximately
3.5% after forming an investment group with Qatar Holding LLC, a sovereign wealth fund. We
have increased our position because we continue to believe that Cadbury’s implied target
value per share could be as high as 970p, nearly 60% above the current share price, assuming
the Company successfully executes on the plans outlined below.
As you know, Trian has engaged in a regular dialogue with Cadbury’s management and
certain members of the Board for the past nine months and supports many of the Company’s
announced plans. Trian is nevertheless concerned that recent management updates to
shareholders on the performance of the business seem to be followed by declines in the share
price. This was the case after last week’s trading update (the stock price has since fallen 32p)
and was also the case following the August 1 st release of interim results (the stock price fell
51p, the largest one-day decline in more than 15 years). We believe this trend signals that
management’s credibility with the Company’s shareholders is still very low.
Of course, the most important barometer of management credibility is how the market values
the shares in the context of management’s operating and financial targets. If the Company
were to successfully execute its own previously announced initiatives, we believe the current
implied target value per share should be approximately 741p to 846p, depending on the
valuation multiples the market ultimately assigns to the beverage and confectionary
businesses (see Appendix I). Most of this potential value creation comes from management’s
plan to increase confectionary margins by approximately 500 basis points to levels closer to
what most food companies achieve, reaching mid-teen margins by 2011. That the shares
continue to trade at a 22% to 39% discount to the values implied by management’s plan

© 2007-2008 Trian Fund Management, L.P. All rights reserved.

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However. should Cadbury fail to demonstrate meaningful operational progress in 2008 that translates to the bottom line. 3. including salmonella issues in the UK. currently achieve. Based on this plan. we urge Cadbury to take the following specific actions that we believe are critical to demonstrating that management is on track to deliver improvements in the business and that the Board is committed to holding management accountable and increasing shareholder value: 1. Based on our extensive due diligence on Cadbury. as well as Trian and its principals’ track record of fixing operations at underperforming companies. including Wrigley and Hershey. We would suggest that full year 2008 guidance for confectionary margins should target at least 175 basis points of improvement. Currently. in fact. confectionary margins in 2011 would remain hundreds of basis points lower than what other leading confectionary companies. fraud in Nigeria and under-deliverance on past margin targets. Cadbury can create substantial incremental value for shareholders. the Board cannot hold management accountable and shareholders will continue to discount the potential for any margin progress. To fully restore credibility. By so doing. if not higher. Continue cost reduction efforts and transformation of beverage business. Trian believes Cadbury should be able to achieve mid-teen margins by 2009 and best-in-class. as it produces too little improvement over too long a time period. we view it as too little improvement over too long a time period . given that much of the groundwork for future cost reduction has been laid in 2007. Trian continues to believe that the current management team is capable of achieving its plan as well as the actions we are proposing. Trian believes the current management team and Board have made sound strategic judgments in the past. the Company has committed to improve confectionary operating margins from approximately 10% in 2007 to the “mid-teens” by 2011. Management should deliver quarterly updates throughout next year confirming that it is on track to deliver on these targets. Set near-term margin targets for the confectionary business that demonstrate meaningful improvement will be made beginning in 2008. L. or high-teen margins by 2011. without specific 2008 margin targets. 2. including the acquisition of Adams and the recent decision to separate the beverage and confectionary businesses. 2 . Set a goal to improve beverage margins at least 300 basis points by eliminating duplicative central © 2007-2008 Trian Fund Management. All rights reserved. than its confectionary peers. we see no structural impediment to Cadbury achieving margins that are at least as high. Instead.suggests the market is skeptical and has discounted virtually any potential for margin improvement. Trian believes management’s multi-year margin improvement initiative is readily achievable. Trian believes management’s current goal of achieving only mid-teen margins by 2011 is unacceptable.P. Increase medium and long-term confectionary margin goals to target achieving midteen margins by 2009 and high-teen margins by 2011. Trian will look to become significantly more active in evaluating all of our alternatives as a large shareholder. However. And notwithstanding various operational problems that have arisen under the current leadership team.

they should continue to serve on either the beverage or confectionary company’s board once the businesses are separated. Clamato. Add several new directors to the Board with relevant industry backgrounds and experience overseeing operational turnarounds. As long-term shareholders who believe in the enormous potential for value creation at both of these businesses.costs. Depending on these new directors’ areas of expertise. We urge Cadbury to announce plans for a recapitalization now to further strengthen the Company’s commitment to drive shareholder value by leveraging future margin improvement. L. Trian has attached to this letter an overview of our investment thesis and additional detail on the actions we believe the Company should take to enhance shareholder value (see Appendix © 2007-2008 Trian Fund Management. 3 . As you know. ReaLime and Rose’s. Trian has already suggested several well-regarded candidates for consideration whom we believe would be willing to serve as directors. ReaLemon. the beverage business generates exceptional free cash flow and will most likely command an attractive valuation in the market that would be enhanced by optimizing capital efficiency. All rights reserved. executing on acquisition synergies and extracting manufacturing and distribution efficiencies. We have already discussed with you the potential to use excess cash from the recapitalization to pay a special dividend. taking advantage of any short-term dislocation in its share price due to flowback. since the non-executive Chairman has announced he will be retiring next spring.75x for beverage based on our 2007 forecasts and at least 2. These businesses add manufacturing and operational complexities. Despite continued investment. Trian will look to become significantly more active in evaluating all of our alternatives as a large shareholder. simplifying the organizational structure. we believe a Chairman in-waiting should be named now to provide visibility for the market and ensure an orderly transition. Based on these businesses’ strong free cash flow profiles. Another alternative would be to hold back some cash to repurchase shares of the beverage business post-spin.50x for confectionary based on our 2008 forecasts. We believe Cadbury should strengthen the Board now . We also believe that the Company should consider divesting certain businesses following the spin. we believe they can comfortably support these proposed debt levels while also maintaining ample flexibility to fund future growth and cost saving initiatives.P. Likewise. are distributed primarily through a different channel (grocery) than much of the remaining portfolio but are nevertheless outstanding brands that we believe have considerable market value. as the Company’s underperforming standalone beverage and confectionary companies may well become acquisition targets. If management and the Board fail to make progress in the coming months on their initiatives and the plans we have outlined. 5. We recommend leverage multiples (net debt / EBITDA) of 4. 4. the confectionary business remains a strong free cash flow generator. including Motts. Recapitalize the balance sheet and return capital to shareholders. improving margins and creating meaningful long-term shareholder value. If these targets are not achieved. we also believe there is a reasonable probability that matters will be taken entirely out of the hands of the Board and management. in advance of separating the beverage and confectionary businesses. we would view this last outcome as disappointing for all of Cadbury’s stakeholders. Lastly.

Ed Garden Portfolio Manager Founding Partner 4 .II). Sincerely. We have decided to make this letter public. we are prepared to meet with you to further discuss the Company’s plans and our suggested initiatives to unlock Cadbury’s significant values. Nelson Peltz Chief Executive Officer Founding Partner Peter May President Founding Partner © 2007-2008 Trian Fund Management. As always. L. in order to “set the record straight” about our interests in Cadbury since we have not publicly commented on our position.P. along with the attached appendices. All rights reserved.

305 2.0% £2.Appendix I (£ in millions. Confectionary Margin Improvement % Change From Current Trian's Margin Plan: Value From Margin Improvement: 2011E Confectionary Net Sales Margin Improvement .136 192p £655 12.5x £9. except per share values) Downside Valuation Multiple Case Trian Valuation Multiple Case Confectionary Valuation: 2007E EBITDA Multiple Enterprise Value Net Debt Allocated to Segment (1) Equity Value Fully Diluted Shares Implied Target Value Per Share £706 13.382 503 bps £321 13.039) £7.0 14.8x £8.489 2.136 80p C 622p 716p D=A+B+C £6. Confectionary Margin Improvement Incremental Value Per Beverage Share From Margin Improvement (3) Total Implied Target Value Per Share from Trian's Plan Incl.335 4.0%. realized by 2009.344 (2. Based on the same methodology for valuing margin improvement as is used above for management's plan. Assumes that Cadbury initiates a recapitalization targeting leverage multiples (net debt/EBITDA) of 4.401 (3.5x £4.200 (3.136 248p B Cash Available to Return to Shareholders (1) Fully Diluted Shares Value Per Share (Dividend or Share Repurchase) £1.039) £8.0% £2.136 80p £1.P.75x for beverage based on our 2007 forecasts and 2.109) £4.0 14.50x for confectionary based on our 2008 forecasts.772 130p E 741p 22% 846p 39% Total Implied Target Value Per Share Management's Margin Plan: Value From Confectionary Margin Improvement: 2011E Confectionary Net Sales Margin Improvement .7x £10.701 2. L.0x £7.382 503 bps £321 14. All rights reserved.136 389p A Beverage Valuation: 2007E EBITDA Multiple Enterprise Value Net Debt Allocated to Segment (1) Equity Value Fully Diluted Shares Implied Target Value Per Share £655 11.701 2.553 120p £6.bps Incremental Value Per Confectionary Share (Discounted to Present) (2) Implied Target Value Per Share Incl.292 2. Beverage Margin Improvement % Change From Current Note: (1) (2) (3) £6. Based on 300 bps of margin improvement at the beverage business.bps Improvement in EBITDA Driven by Margin Opportunity Multiple Applied to Confectionary Business Total Implied Value Realizable from Margin Opportunity Discount Period (Yrs) Discount Rate Implied Discounted Value Incremental Value Per Confectionary Share (Discounted to Present) Implied Target Value Per Share Incl.382 822 bps 212p 928p 42p 970p 60% D+E F D+F Please see Appendix II for a more detailed valuation analysis.091 2.527 (2. © 2007-2008 Trian Fund Management.707 4.7x £4.136 351p £706 14. Incremental value from assumed beverage margin improvement has been discounted back to the present assuming a discount rate of 14.109) £5. 5 .

In our view. All rights reserved. - Cadbury is the number one global confectionary company in terms of market share. despite Cadbury’s announced plans to separate its confectionary and beverage businesses. as well as beverage margin improvement. This business has highly attractive margin. Summary of Trian’s investment views: § Outstanding collection of beverage and confectionary brands. we believe Cadbury is trading at an approximate 18% discount to its implied target value relative to its publicly traded.P. Trian will look to become significantly more active in evaluating all of our alternatives as a large shareholder.Appendix II Investment funds and accounts managed by Trian Fund Management. as Cadbury’s corporate structure has obfuscated the intrinsic value of its assets. including a strong presence in emerging markets. gums and chocolates should further drive sales. - Based on an analysis of valuation multiples for comparable companies. we believe the market continues to value the Company as an inefficient holding company. § Achieving management’s confectionary margin improvement plan. § Trades at an 18% discount to the sum-of-its parts. with leading brands and strong carbonated and non-carbonated offerings. as management has committed to do. § Beverage and confectionary businesses should be separated. § Should Cadbury fail to demonstrate meaningful operational progress in 2008 that translates to the bottomline.5% of the outstanding shares of Cadbury Schweppes plc (“Cadbury” or “the Company”). this has been the case for a number of years. cash flow and return-oninvestment characteristics – all characteristics that we believe will make it a “must-own” pure-play beverage company once separated. § Opportunity to dramatically improve confectionary margins. with exposure to some of the fastest growing segments in the industry.P. before considering the potential for numerous operational improvements. which we view as readily achievable based on our operational experience. implies the shares are currently undervalued by approximately 60%. implies the shares are currently undervalued by approximately 46%. representing a 46-60% increase from yesterday’s closing price. Trian believes that committing to and executing the plan outlined below could lead to an implied target value per Cadbury share of approximately 888p to 970p (see Table 6). and we continue to believe that Cadbury shares are significantly undervalued. § Achieving best-in-class confectionary margins.5% after forming an investment group with Qatar Holding LLC. L. “Trian”) own interests in approximately 4. (collectively. - Cadbury’s beverage business is a coveted platform. pure-play competitors before considering tremendous opportunities for improvements in operations and profitability (see Table 1). Trian has recently increased its position from approximately 3. Nevertheless. L. 6 . a sovereign wealth fund. MAIN DRIVER OF VALUE CREATION Our investment thesis: § § Cadbury has a world-class portfolio of confectionary and beverage brands. § Opportunity for margin improvement at the beverage business and faster growth. Cadbury’s ability to capitalize on wellness trends by leading industry expansion into new functional candies. © 2007-2008 Trian Fund Management.

490 3.047) (400) £15.986 £16. £73.745 (3.5 14. Numbers are before non-recurring expenses and restructuring charges.828 673 8.033 11. paving the way for the Company to begin realizing operating improvements and growth opportunities.8x £4. Average Multiple (Excluding Cadbury) (1) Beverage: Coca-Cola Co.” respectively) where we believe there is significant opportunity for improvement.360 Confectionary Multiple Applied (Peer Average) Beverage Multiple Applied (Implied 25% Premium for Coca-Cola) 14.286 £5. L. Most importantly.8x Implied Cadbury Enterprise Value Cadbury Net Debt Taxes / Fees from Separation and Recap Implied Cadbury Equity Value £18. Cadbury financials are based on Company filings. Defined as earnings before interest.0x Valuation £706 655 £1.P.” or high-teen.298 Implied Cadbury Target Value Per Share Current Share Price 716p 608p Implied % Discount Source: (1) (2) § 14. we believe the current holding company discount applied by the market will begin to diminish. William Wrigley Jr. Lindt & Spruengli AG Tootsie Roll Industries Inc. company filings and Wall Street research.- By separating the beverage business. Table 1: Sum-of-the-Parts Analysis and Implied Valuation Target (Assuming No Operating Improvement) (£ in millions. Pepper Snapple Group.479 Estimates for Cadbury Segments: Confectionary 2007E EBITDA (2) Beverage 2007E EBITDA (2) Total 16.083 £75.9 14. - Confectionary business: It is well documented that confectionary operating margins are approximately 800-850 basis points (“bps”) lower than those of pure-play competitors and significantly below those of non-confectionary food companies (see Table 2).7x 18% Bloomberg. management guidance and Trian estimates. taxes. achieving mid-teen margins by 2011. Co. Management has announced a plan to narrow the gap with confectionary peers by approximately 500 bps.729 9.7x 12. 7 .8 Confectionary: Hershey Co.734 645 8.” or “DPSG.” and “Standalone Confectionery. eliminating the holding company structure will better focus management by “shining a spotlight” on the operating performance of both the beverage and confectionary businesses (“Dr. operating margins by 2011.9x 19. Trian believes Cadbury’s margin goal is insufficient – the timetable is too long and Cadbury should instead target achieving mid-teen operating margins by 2009 and “best-in-class. depreciation and amortization. except per share values) Equity Enterprise EV / 2007E Company Value Value ("EV") EBITDA (2) Cadbury £12. All rights reserved. Average confectionary multiple is weighted by peer equity values. as management has announced it will do by the end of the second quarter of 2008 through a tax-free spin-off.327 3. © 2007-2008 Trian Fund Management.

0% / 15. Hershey’s 2007 estimated margin of 17.4% Source: (1) Cadbury Confectionary Conagra Kraft Cadbury Consolidated Nestle Unilever Danone Kellogg Campbell Heinz General Mills Hershey (1) Wrigley PepsiCo Cadbury Beverages 10.7% 13.5%. © 2007-2008 Trian Fund Management. Hershey has committed to a cost-cutting plan targeting an incremental 300 bps of margin improvement but we have used Hershey’s 2007 “depressed” margin for benchmarking purposes. Steps to maximize value at Cadbury: Trian has engaged in a constructive dialogue with Cadbury’s management team and Board of Directors for the past nine months and supports many of the Company’s value-creation initiatives.9% 16.3% "Pure Play" Competitors: Wrigley 18.0% Peer margins per Bloomberg and Wall Street research. management and the Boards of both standalone companies will have nowhere to hide and must be prepared to maximize performance knowing that potential acquirors may seek to take matters out of their hands. Cadbury margins per Company filings. reducing the pressure on management to optimize performance. including a £35 million cost reduction program that should more than offset lost bottling revenue. the Company’s present structure has served as a “poison pill.9% 15.4% 18. Moreover. Once a separation has occurred. - In our view. Specifically. therefore. Immediately address operating margin deficiencies at Standalone Confectionary by carefully reevaluating every aspect of the business.9% (1) Peer Average / Median (Excluding Hershey and Wrigley): 15. which would translate into a significant increase to EBITDA and valuation. Hershey 17.7% 13. All rights reserved. Cadbury margins have been adjusted for non-recurring expenses. management guidance and Trian estimates. 8 . we believe overall margins can be improved at least 300 bps. We believe a management team focused extensively on DPSG will be better positioned to realize the full potential of existing brands and play a leadership role in developing new ideas to capitalize on evolving consumer trends. we believe management can go even further towards improving the profitability of this business. which have not been addressed in the past. allocation of corporate overhead and assumed full year impact of acquisitions and divestitures made in 2006. 1. - Beverage business: While the beverage management team has already begun the process of eliminating unnecessary expenses in advance of the 2008 second quarter separation.7% 13.2%). based on a review of DPSG’s profitability by operating segment.P.4% 15. Trian believes Cadbury can achieve best-in-class margins by 2011 through: - A relentless focus on cost reduction (including corporate/administrative costs) and the elimination of duplicative functions. which has been the “sweet spot” for industry growth in recent years.6% 10.9% 18. we believe there are a number of brands within the beverage portfolio with the potential for a revival or brand extensions that have been neglected historically. Many of these brands compete in the non-carbonated arena.8% 15. L.9% 16.9% is expected to be well below historical margins (Hershey’s 2004 – 2006 average margin was 20. DPSG has been unable to capitalize on several areas of explosive industry growth in recent years. including the emergence of bottled water and energy drinks. under the supervision of a strengthened confectionary Board of Directors.5% 17. Trian is committed to continuing to work with the Company’s leadership to help ensure the successful execution of these initiatives as well as the elements of Trian’s plan outlined below in order to unlock significant shareholder value.” deterring potential takeover attempts because few suitors have the appetite or resources necessary to buy the whole company and.0% 13. On the competitive front.Table 2: Comparison of Operating Margins for Large-Cap Food Industry Peers (2007E) 20.

These new directors should have relevant industry backgrounds and experience overseeing operational turnarounds. we believe DPSG can improve margins at least 300 bps over time driven by eliminating duplicative central costs.P. they should continue to serve on either the beverage or confectionary company’s board once the businesses are separated. a strategic initiative we strongly support. We also believe that DPSG should consider divesting certain businesses.70 billion of capital through a dividend of 80p. demands results. Rather. L. Continue cost reduction efforts and transformation of DPSG. This growth should further leverage a reduced fixed cost base. Trian’s principals have extensive experience operating beverage businesses. to not only be the world’s largest and fastest growing confectionary company but to be the most profitable. Compensation plans should be driven by profitability at the division levels. as well as Trian and its principals’ track-record of fixing operations at underperforming companies. we believe a Chairman in-waiting should be named now to provide visibility for the market and ensure an orderly transition. These businesses add manufacturing and operational complexities. - A commitment. Lastly. we believe margin improvement begins with a leadership team that sets targets. As previously stated. starting with the Company’s leadership team and filtering throughout the organization. and at least 2. in advance of separating the beverage and confectionary businesses. We believe Cadbury should strengthen the Board now. ReaLemon. we believe there is no reason why Cadbury should not have as high or higher confectionary margins than best-in-class peers. properly incentivizes employees and is fanatical about driving out unnecessary expenses. Based on our extensive due diligence on Cadbury. Trian has already suggested several well-regarded candidates for consideration whom we believe would be willing to serve as directors. Based on this experience. Based on DPSG and Standalone Confectionary’s strong free cash flow profiles.75x for DPSG. improving margins and creating meaningful long-term shareholder value. Recapitalize the confectionary and beverage businesses. - Prioritizing resource allocation to the highest margin products. simplifying the organizational structure.50x for Standalone Confectionary. based on our 2008 forecasts. including the highly successful turnaround of Snapple Beverage Corp. which Cadbury has begun to do. Add several new outside directors to help oversee execution of the plans. we emphatically oppose the notion that there are structural differences at Cadbury that stand in the way of achieving best-in-class margins. 4. Unlike many in the financial community. are distributed primarily through a different channel (grocery) than much of the remaining portfolio but are nevertheless outstanding brands that we believe have considerable market value. 9 . ReaLime and Rose’s. Depending on these new directors’ areas of expertise. return capital to shareholders and complete the 100% spin-off of DPSG. executing on acquisition synergies and extracting manufacturing and distribution efficiencies. pricing power and exposure to fast-growing geographic regions.- Identifying procurement. a portion of the cash proceeds from the recapitalization can also be held back to repurchase DPSG shares. we firmly believe that eliminating unnecessary costs and bureaucracy. 3. - Continued strong organic revenue growth from innovation. Clamato. This will allow shareholders to own two “pure-play” securities – representing distinct interests in beverage and confectionary – and permit the Company to return approximately £1. 2. creates a more entrepreneurial culture that rewards creativity and ultimately translates into better results. (sold to Cadbury in 2000). All rights reserved. based on our 2007 forecasts. To mitigate any short-term dislocation in DPSG’s share price following the spin-off. since the non-executive Chairman has announced he will be retiring next spring. we believe they can © 2007-2008 Trian Fund Management. - Rationalizing the manufacturing footprint. Cadbury has committed to spinning off its beverage business by the end of the second quarter of 2008. We also believe the Company should announce plans for a recapitalization and recommend leverage multiples (net debt / EBITDA) of 4. Accountability for “shared” or “allocated” expenses must be clear to ensure that the individuals who control these expenses are properly incentivized to minimize or eliminate them. manufacturing and supply chain inefficiencies. including Motts.

701 Per Share Cash Available for Return Pro Forma Capitalization: Net Debt Fully Diluted Shares (mm) (1) (2) (3) Confectionary £815 Net Debt / EBITDA Note: £2. predictable cash flows and insulation from market volatility (including the credit markets). diverse portfolio of other leadings brands and exposure to the fast-growing noncarbonated segment. For these investors.50x 2.136 £655 (3) 4. except per share values) Recapitalization & Cash Available to Return to Shareholders: Sources: Uses: New Debt Proceeds £2. Though we would not expect DPSG to achieve quite the same valuation as Coca-Cola. More likely. 6% of its EBITDA and 15% of its net income.P. L.101 Total Sources £2. we estimate that bottling accounts for approximately 46% of its net revenue. In contrast to market reports to the contrary. as there is sufficient cushion for these costs to be funded by free cash flow at both DPSG and Standalone Confectionary.75x 2. All rights reserved. assuming the market would conclude that © 2007-2008 Trian Fund Management. DPSG valuation: Trian believes that a spin-off of DPSG will result in meaningful value realization and will provide an opportunity for shareholders to capture upside in the long-term that otherwise would go to a buyer in the event of a sale. Table 3: Recapitalization Assumptions and Pro Forma Capital Structure (£ in millions. and ultimately DPSG.101 Taxes / Fees from Separation and Recap Proceeds Available for Return to Shareholders (1) £400 1. allocation of corporate overhead and assumed full year impact of acquisitions made in 2006. is significantly overstated. Cadbury numbers have been adjusted for non-recurring expenses. At DPSG. strong.109 (2) 2.039 EBITDA Source: 80p Total Uses £3.101 Beverage £2. DPSG will provide a compelling investment opportunity. we would note Coca-Cola’s revenues are derived from a variety of business lines including bottling operations that the Company controls/consolidates and also has equity investments in. we believe a sum-of–the-parts approach to valuation is appropriate and have analyzed each business by benchmarking it against pure-play competitors and assuming that an efficient capital structure has been put in place (Table 3). Cash can be used to pay a special cash dividend or to repurchase beverage shares following the spin-off. We have not included future restructuring charges as a use of cash. rumored bid levels from prospective buyers for DPSG fell and Cadbury was grouped into a category of companies that are essentially failed leveraged buyout candidates.comfortably support these proposed debt levels while also maintaining ample flexibility to fund future growth and cost saving initiatives. as compared to DPSG which has significant bottling exposure. the common perception that Coca-Cola is a pure-play concentrate business. Applying Coca-Cola’s 2007 EBITDA multiple to DPSG implies a target value of approximately 346p per share (after deducting 146p per share of allocated net debt). While the leveraged finance market has weakened. it is notable that Coca-Cola’s shares have surged and are close to a multi-year high. We believe public market investors are attracted to pure-play beverage companies like Coca-Cola. Thus.0x 2007 EBITDA. management guidance and Trian estimates. 12% of its EBITDA and 10% of its net income.136 Company filings. Confectionary EBITDA represents Trian's fiscal 2008 estimate. 10 . we nevertheless believe Coca-Cola’s valuation places a high ceiling on the multiple that could be achieved by DPSG in the public markets. Arriving at an implied valuation target for Cadbury’s shares: Given the announced separation of beverage and confectionary. Beverage EBITDA represents Trian's fiscal 2007 estimate. CocaCola is the only “pure-play” beverage competitor of consequence and trades at an enterprise value multiple of approximately 16. due to their iconic brands. given its number one position in the attractive flavored cola market. We estimate that bottling accounted for approximately 25% of Coca-Cola’s trailing twelve months consolidated net revenue.

.174 2.0 14. and PepsiCo Inc.Capex as a % of Sales 19.8x £1. we are left to value Standalone Confectionary including the dramatic opportunity for margin improvement.6% Assumed 2007E EBITDA Multiple 12.8x multiple (see Table 4 for a summary valuation of DPSG. food universe includes Campbell Soup Co. Kraft Foods Inc.0% £898 42p 290p DPSG Comparison to Food Company Index: DPSG EBITDA Margins 23. Interestingly. that would imply a target value of 248p per share based on a multiple of 12. packaged food universe currently trades. U.S.048 300 bps £91 12. that would result in a discounted implied target value of 290p assuming the same 12.S.9% 433 bps 14.8x Implied Enterprise Value Per Beverage Share Less: Net Debt Per Beverage Share Implied Target Equity Value Per Beverage Share Before Margin Improvement 492p (146p) 346p 393p (146p) 248p Incremental Value from Margin Improvement: 2011E Sales Margin Improvement . given Coca-Cola’s dominant market position and global scale. which we believe is warranted given DPSG has significantly higher margins. implying a substantial multiple discount to Coca-Cola.. Kellogg Co. Conagra Foods Inc. which Trian believes is the single biggest driver of shareholder value creation at Cadbury.7% higher than the average of where the U.. General Mills Inc. Cadbury numbers have been adjusted for non-recurring expenses. allocation of corporate overhead and assumed full year impact of acquisitions made in 2006. generates better cash flow and has generated comparable or better organic growth rates than many food companies in recent years. L. 11 ...bps Improvement in EBITDA Driven by Margin Opportunity Multiple Applied to DPSG Total Implied Value Realizable Discount Period (Yrs) Discount Rate Implied Discounted Value Incremental Value Per Beverage Share (Discounted to Present) Total Implied Target Value Per Beverage Share Assuming Margin Improvement £3. a valuation in this range implies a multiple for DPSG that is 16. including the methodology used to value future margin improvement).2% EBITDA .Coca-Cola is deserving of a 25% higher multiple relative to DPSG. Applying the average of the peer company multiples to Standalone Confectionary’s 2007 EBITDA forecast implies a per share value target of approximately 389p per share (after deducting 95p per share of allocated net debt).0x Company filings.S. Food vs. © 2007-2008 Trian Fund Management.0x 12. Net debt allocation is based on incremental leverage as highlighted in previous table. This value does not account for any future confectionary margin expansion.6% 499 bps 11. Food Universe is driven by superior free cash flow U. management guidance and Trian estimates.P. Should DPSG successfully improve operating margins by 300 bps as we have suggested.8x Source: Note: Premium multiple to the U.S. Food Index Universe Better / (Worse) 18. All rights reserved. HJ Heinz Co. Assumed EV / 2007E EBITDA Multiple 16. Table 4: Per Share Implied Target Value of DPSG Assuming Assuming Coca- Coca-Cola's Cola Deserves a Multiple 25% Premium Mult.8x. Standalone Confectionary valuation: With a dividend of 80p per share and DPSG valued at 290p per share.

© 2007-2008 Trian Fund Management. based on our extensive due diligence on Cadbury. Tootsie Roll Industries Inc.Standalone Confectionary margins are barely half the level of the Company’s closest peers. 12 . Peer group used to arrive at EBITDA multiple consists of Hershey Co. representing 60% upside to the current share price (see Table 5 for a summary valuation of Standalone Confectionary.382 503 bps £321 14.0% £4.. Margin improvement is also something that management has significant ability to influence through a disciplined cost reduction program.P. margins by 2011.0 14.382 822 bps £525 14.2% EBIT margins are achieved in 2011.. Should Standalone Confectionary close the margin gap with its best-in-class confectionary peers. allocation of corporate overhead and assumed full year impact of acquisitions made in 2006.0 14.” or highteen. except per share values) Implied Target Value Before Margin Improvement Assumed EV / 2007E EBITDA Multiple (Peer Average) (1) 14.772 130p £6. For margin improvement cases. we believe that the current plan to increase operating margins from approximately 10% to the mid-teens by 2011 is insufficient. Co. as well as Trian and its principals track-record of fixing operations at underperforming companies.7x £7. The management plan case assumes 15% EBIT margins are achieved in 2011.7x £4. management guidance and Trian estimates.692 4. while depreciation and amortization as a percentage of sales remains flat at 2007 levels. and Table 6 for a summary valuation of the Company as a whole). assumes that EBIT (earnings before interest and taxes) margins expand by the amounts indicated above.707 4. William Wrigley Jr. and William Wrigley Jr.7x Implied Enterprise Value Per Confectionary Share Less: Net Debt Per Confectionary Share Implied Target Equity Value Per Confectionary Share Before Margin Improvement Incremental Value from Margin Improvement: 2011E Sales Margin Improvement . All rights reserved. equaling the 2007E average of Hershey Co. as we believe is possible. L. Once again. we arrive at an implied value for the Company as a whole of approximately 970p per share.530 212p 519p 601p Company filings. Cadbury numbers have been adjusted for non-recurring expenses. As previously stated.0% £2. and Lindt & Spruengli AG. Table 5: Per Share Implied Target Value of Standalone Confectionary (£ in millions. The 'Best-In-Class' case assumes 18. including the methodology used to value future margin improvement.bps Improvement in EBITDA Driven by Margin Opportunity Multiple Applied to Confectionary Total Implied Value Realizable Discount Period (Yrs) Discount Rate Implied Discounted Value Incremental Value Per Confectionary Share (Discounted to Present) Total Implied Target Value Per Confectionary Share… Assuming Margin Improvement Source: (1) (2) (3) 484p (95p) 389p Management Plan (2) 'Best-In Class' (3) £6. we arrive at a discounted implied target value for Standalone Confectionary of 519p per share and an implied target value for the Company as a whole of approximately 888p per share. Co. Net debt allocation is based on incremental leverage as highlighted in previous table. Should Cadbury achieve even management’s current plan of mid-teen confectionary margins by 2011. we believe Cadbury’s plan should be amended to target mid-teen operating margins by 2009 and “best-in-class.

P. ARE ACCURATE. TRIAN PARTNERS SHALL NOT BE RESPONSIBLE OR HAVE © 2007-2008 Trian Fund Management. SECURITIES AND EXCHANGE COMMISSION ("SEC").S. TRIAN PARTNERS HAS NOT SOUGHT OR OBTAINED CONSENT FROM ANY THIRD PARTY TO USE ANY STATEMENTS OR INFORMATION INDICATED HEREIN AS HAVING BEEN OBTAINED OR DERIVED FROM STATEMENTS MADE OR PUBLISHED BY THIRD PARTIES. L. OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION.Table 6: Summary Implied Target Value Table Implied Target Value Per Share Current Share Price 608p Implied Target Value Per Beverage Share Before Margin Improvement (Discount to Coca-Cola) Implied Target Value Per Confectionary Share Before Margin Improvement (Peer Average) Cash Available to Return to Shareholders: Total Implied Target Value Per Share Before Margin Improvement % Change from Current 248p 389p 80p 716p 18% Confectionary Margin Improvement Management Plan Incremental Target Value Per Share From Confectionary Margin Improvement Total Implied Target Value Per Confectionary Share… Assuming Margin Improvement Total Implied Target Value Per Cadbury Share… Assuming Confectionary Margin Improvement 'Best-In-Class' 130p 212p 519p 601p 846p 928p Beverage Margin Improvement Incremental Target Value Per Share From Beverage Margin Improvement Total Implied Target Value Per Cadbury Share… Assuming Confectionary And Beverage Margin Improvement % Change from Current 42p 42p 888p 46% 970p 60% Trian is enthusiastic about the opportunity for substantial value creation at Cadbury and is excited by the upcoming separation of its beverage and confectionary businesses. THE FSA OR OTHER REGULATORY AUTHORITY OR FROM ANY THIRD PARTY.P. L. 2007 ---------------------------------------------------------------------------------THIS PRESENTATION IS FOR GENERAL INFORMATIONAL PURPOSES ONLY. AND SHOULD NOT BE TAKEN AS ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. NO WARRANTY IS MADE THAT DATA OR INFORMATION. THE U. SUITABILITY. more efficient capital allocation and stronger focus. (“Trian Partners”) Founded in 2005 by Nelson Peltz. Trian Partners seeks to work closely with the management of those companies in which it invests to enhance shareholder value through a combination of strategic redirection. All rights reserved. WHETHER DERIVED OR OBTAINED FROM FILINGS MADE WITH THE SEC. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE. FINANCIAL SERVICES AUTHORITY ("FSA") AND/OR OTHER REGULATORY AUTHORITIES.K. Peter May and Ed Garden. We look forward to continuing a constructive dialogue with Cadbury’s management team and Board to help ensure that the Company successfully executes on the initiatives outlined above to unlock substantial shareholder value. 13 . THE VIEWS EXPRESSED IN THIS PRESENTATION REPRESENT THE OPINIONS OF TRIAN PARTNERS AND ARE BASED ON PUBLICLY AVAILABLE INFORMATION WITH RESPECT TO CADBURY SCHWEPPES PLC (INCLUDING ANY ENTITY THAT MAY BE SPUN OFF THEREFROM. FINANCIAL SITUATION. ANY SUCH STATEMENTS OR INFORMATION SHOULD NOT BE VIEWED AS INDICATING THE SUPPORT OF SUCH THIRD PARTY FOR THE VIEWS EXPRESSED HEREIN. About Trian Fund Management. "CADBURY") AND THE OTHER COMPANIES REFERRED TO HEREIN. CERTAIN FINANCIAL INFORMATION AND DATA USED HEREIN HAVE BEEN DERIVED OR OBTAINED FROM FILINGS MADE WITH THE U. December 18. improved operational execution.

AND SUCH DIFFERENCES MAY BE MATERIAL.5% OF CADBURY’S SHARES. © 2007-2008 Trian Fund Management. PUTS. THESE FUNDS AND ACCOUNTS ARE IN THE BUSINESS OF TRADING. BUY ADDITIONAL INTERESTS OR SHARES. THIS PRESENTATION IS PROVIDED MERELY AS INFORMATION AND IS NOT INTENDED AS AN INVITATION OR INDUCEMENT TO PURCHASE OR SELL ANY INVESTMENT AND IS THEREFORE NOT A FINANCIAL PROMOTION AS CONTEMPLATED BY SECTION 21 OF THE U. FINANCIAL SERVICES AND MARKETS ACT. AND SUCH SECURITIES MAY NOT TRADE AT PRICES THAT MAY BE IMPLIED HEREIN. FUNDS AND ACCOUNTS MANAGED BY TRIAN PARTNERS CURRENTLY HAVE AN ECONOMIC INTEREST IN APPROXIMATELY 4. TRIAN PARTNERS DISCLAIMS ANY OBLIGATION TO UPDATE THE INFORMATION CONTAINED HEREIN. IT IS POSSIBLE THAT THERE WILL BE DEVELOPMENTS IN THE FUTURE THAT CAUSE ONE OR MORE OF SUCH FUNDS OR ACCOUNTS FROM TIME TO TIME TO SELL ALL OR A PORTION OF THEIR HOLDINGS. THE ESTIMATES. BUT THERE CAN BE NO ASSURANCE OR GUARANTEE THAT ACTUAL RESULTS OR PERFORMANCE OF CADBURY WILL NOT DIFFER. BUYING AND SELLING SECURITIES. THERE IS NO ASSURANCE OR GUARANTEE WITH RESPECT TO THE PRICES AT WHICH ANY SECURITIES OF CADBURY WILL TRADE. CALLS.ANY LIABILITY FOR ANY MISINFORMATION CONTAINED IN ANY REGULATORY FILING OR THIRD PARTY REPORT. 14 . NOR IS THIS PRESENTATION ANY FORM OF INVESTMENT ADVICE TO THE RECIPIENTS. PRO FORMA INFORMATION AND POTENTIAL IMPACT OF TRIAN PARTNERS’ PROPOSALS SET FORTH HEREIN ARE BASED ON ASSUMPTIONS THAT TRIAN PARTNERS BELIEVES TO BE REASONABLE. THIS PRESENTATION DOES NOT RECOMMEND THE PURCHASE OR SALE OF ANY SECURITY.K. PROJECTIONS. CONTRACTS FOR DIFFERENCES OR OTHER DERIVATIVE INSTRUMENTS RELATING TO CADBURY’S SHARES.P. All rights reserved. TRIAN PARTNERS RESERVES THE RIGHT TO CHANGE ANY OF ITS OPINIONS EXPRESSED HEREIN AT ANY TIME AS IT DEEMS APPROPRIATE. L. OR TRADE OPTIONS.