Cadbury sets focus on original chocolate factory

Wed Oct 15, 2008 8:30pm EDT
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By David Jones

BOURNVILLE (Reuters) - Cadbury, the world's second-largest confectionery maker, argues that even when times are tough, chocolate is an affordable treat and one of the last to be scratched off people's shopping lists.

But even this company, traditionally a "defensive" play which can weather hard times, now faces slowing economies, high cocoa prices, a new industry-leader as rival and the aftermath of salmonella and melamine health scares.

Founded by John Cadbury nearly 200 years ago as a family firm, Cadbury is now a widely recognized brand selling products in over 60 countries: as an institution, it has a memory of economic depression.

It saw demand slump in the 1920s and 1930s and had to drive costs sharply down, to make chocolate -- at the time a relatively expensive product -- affordable for Britain's expanding population.

"We are not immune from a more challenging environment but confectionery is a resilient category," its Chief Executive Todd Stitzer told a conference call this week. "We ... are less affected in difficult times."

Now once again the company, with annual confectionery sales of 5.1 billion pounds ($8.9 billion) and operating profit of 497 million in 2007, is cutting costs, closing factories and trimming chocolate bar sizes -- without reducing the price.

It is also reissuing some discontinued lines in a bid to tempt sweet-toothed British consumers with nostalgia, along with a host of new products in gum and candy as well as chocolate.

"We are making major changes to streamline the company," Stitzer said.   Continued...

<p>Workers walk past a logo in Cadbury's Bournville factory in Birmingham, central England, in this October 7, 2008 file photo. REUTERS/Darren Staples/Files</p>