UPDATE: UK/AUS: Cadbury to hang onto Aus drinks ops
Cadbury Schweppes has insisted it will not sell its beverage interests in Australia after the company said it would separate its Americas drinks division from its confectionery business.
The UK-based group, which owns brands including Dr Pepper and 7-Up, told just-drinks today (15 March) that it will retain its drinks business in Australia due to its closer relationship with its confectionery arm in that market.
"We will carry on as usual," a Cadbury spokesperson said in London. "It's very integrated with the confectionery operations - it's a very different business model in Australia compared to the Americas Beverages model."
She added: "It's the nature of the trade in Australia. You're dealing with two major retailers there so scale is important. When you're negotiating with those retailers, they're in a pretty powerful position."
The spokesperson declined to disclose sales from Cadbury's drinks business in Australia. However, the company lost share in the country's carbonates sector last year, although it gained ground in non-carbonates with the launch of Spring Valley bottled water.
Earlier today, Cadbury said it was "evaluating the options for separation" of its Americas Beverages and confectionery businesses and would shed further light on its plans in June.
Cadbury chairman John Sunderland said the move is of "great significance" to the company. He said: "It has been facilitated by acquisitions and disposals over the last decade designed to create a strong and potentially independent Americas Beverages business.
"In the same time, we have built the world's largest confectionery business. We believe now is the moment to separate and give both management teams the focused opportunity to extract the full potential inherent in these excellent businesses."
Cadbury said moves to restructure its drinks operations in the Americas, through bottling acquisitions and a focus on core brands, had "significantly improved" the performance of the business. Last year, the company sold drinks assets in Europe, Syria and South Africa for GBP1.4bn (US$2.7bn).
Cadbury said it is "the right time" to spin off its beverage business in the Americas. Bottling acquisitions has given Cadbury control over 40% of its volumes, while the company said it has managed to "revitalise" its carbonates business in the US.
The company said: "The board believes Americas Beverages now has the appropriate platform to exploit the benefits of focus as a stand-alone business."
Martin Deboo, an analyst at UK bank Investec, believes the most likely bidders will come from the cash-laden private equity sector. "The likely end-game is that the Americas Beverages business will be disposed of, most likely to private equity groups," he told just-drinks today (15 March).
Deboo added: "A trade buyer is less likely than private equity but other buyers could potentially be an American brewing business that wants to add a soft drinks business. However, it would be an odd strategy for a trade buyer to buy into a number three position in the market behind Coke and Pepsi."
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