Cadbury withstands cola battle: Soft drinks sales through Sainsbury rise

SALES OF Coca-Cola through Sainsbury supermarkets fell 15 per cent after it launched its own- brand cola, Cadbury Schweppes said yesterday. The furore over the launch pushed the group's total soft drinks sales through the chain up by 4 per cent, however.

Dominic Cadbury, chairman, said the performance of Coca-Cola & Schweppes Beverages - the joint venture with Coke that also sells brands such as Cresta, Schweppes and Kia-Ora - demonstrated the company's ability to compete with retailers' own-label products.

'A key to our success is the widespread availability of our impulse products through all types of retail outlets and channels of distribution. This exposure ensures that group results are not unduly sensitive to any one particular brand.'

The volume of Cadbury's beverage sales grew by 2 per cent in the first six months of the year but fierce competition for soft drink sales, exacerbated by the Sainsbury cola launch, meant that prices remained under pressure and the value of sales dropped 3.7 per cent to pounds 351.7m.

David Wellings, Cadbury's chief executive, attributed that partly to changes in the mix of products, with more sales of bottled water and brands such as Cresta. But he added: 'There is also increasing price-consciousness among consumers and from retailers' own brands.'

Despite the sales decline, profits from the British drinks business rose 12.7 per cent to pounds 51.6m as it cut costs by 10 per cent - including cutting the equivalent of 50 full-time members of staff.

The British performance, coupled with an pounds 11.3m contribution from A&W Brands, the US root beer manufacturer acquired last year, helped push overall drinks profits up pounds 87.7m to pounds 120.8m. The previous year's results were also affected by a pounds 15m charge for restructuring the Spanish operation.

Mr Wellings said the performance of A&W had exceeded expectations, and Cadbury remained comfortable with its 25 per cent stake in Dr Pepper, another US drinks maker, despite its reluctance to give Cadbury a seat on the board.

Sweets also performed strongly, increasing sales 8.3 per cent to pounds 797.2m and profits 11.6 per cent to pounds 83.4m. Chocolate sales in Britain under the Cadbury label rose 4 per cent, while Trebor Basset continued to increase market share. Australia and New Zealand were more difficult, however, leading to a 12.7 per cent drop in trading profits to pounds 21.4m in the Pacific rim countries.

For the group as a whole, pre-tax profits increased 23.2 per cent to pounds 204.8m on sales 3.5 per cent higher at pounds 1.8bn. Margins rose from 10 per cent to 12.1 per cent - a record for the group since it was created by merging Cadbury and Schweppes.

Earnings per share were 13.42p, up 9.9 per cent, while the dividend was increased by 27.8 per cent to 4.6p. Mr Cadbury said that was partly because it intended to pay a greater proportion of the dividend at the interim stage as its business becomes less seasonal.