Cadbury Gum Business in U.S. Falls

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Cadbury Gum Business in U.S. Falls

05/03/2009
LONDON – Confectioner Cadbury PLC reported an unexpected fall in its gum sales in the first quarter, as the recession halts discretionary spending at convenience stores, the Financial Times reported.

The company saw a 2 percent drop in gum revenues, which account for one-third of Cadbury’s total sales. Todd Stitzer, Cadbury chief executive, said gum sales were hit by retailer de-stocking as well as the weak U.S. economy, higher prices and the absence of fresh innovation in the gum category, according to the report.

"The gum category is driven by innovation," Stitzer said. Cadbury plans to release a new gum product in the second half of the year.

"The centrality of U.S. gum to the growth story leaves little room for disappointments of this kind," Martin Deboo, analyst at Investec, told the newspaper, adding the company, which reported a 10 percent rise in gum revenues last year, was no longer taking market share from its competitor, Wrigley.

"Their US gum market share gains have come to an end for the time being," he said.

Cadbury is "not worried" about the company’s 3 percent decline in sales by volume, Chief Executive Officer Todd Stitzer said in a conference call today cited by Bloomberg News. One wholesaler in the U.S. accounted for 75 percent of de-stocking in the country, he added, stating, "In an environment like this we can live with that for the short to medium term."

While Cadbury previously raised prices to compensate for higher ingredient costs, the company doesn’t expect to push further increases onto consumers this year, Bloomberg News reported. Ingredient costs this year probably will rise 6 percent to 8 percent, Chief Financial Officer Andrew Bonfield said on the call.

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