Cadbury Schweppes: Capturing Confectionery

Synopsis

In October 2002, Sir John Sunderland, chairman and CEO of Cadbury Schweppes, contemplated the
future of his global confectionery and beverage company. Over the previous decade, the company
had made several acquisitions to complement its portfolio of chocolate, soft drinks, sugar
confectionery (candy), and gum. Now it was considering a bid for Adams, the number two player in
the worldwide gum business and, with its Halls brand, a leader in sugar confectionery. After
researching the acquisition for many months, his Chief Strategy Officer Todd Stitzer and the Adams
deal team were approaching the point of no return. Sunderland knew that they would have to bid
more than 4 billion dollars to have any chance of winning Adams. Should they go ahead with the
offer.

Pros

Confectionery segment is fragmented so Cadbury has the opportunity to be main player.

Gum has high margin and has only one other big player. High growth potential and looks attractive
for its health benefits

If they fail in the bid, serious problems for their future business considering competition in the
segment

consumer base gets widened

Cons

Analysts estimated that Adams was only worth 3 to 3.5 billion dollars. Decline in U.S cough market
(no top line growth momentum and no margin improvement) Adams deteriorating at an avg rate of
16.5% significantly faster than overall market decline of 6.2%

Scant geographical overlap and little

increased competition in the confectionery business. Turn around and integration issues and
excessive management time from the existing business