Cadbury Schweppes is considering demerging its US soft drinks business once the company has overhauled the operation.
In an interview with The Sunday Telegraph in the UK, Todd Stitzer, the company’s chief executive, said Cadbury was attempting to “fix” the business, after which a decision would be taken on the division’s future. It is estimated that a demerged US soft drinks business could be worth US$7 billion.
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In the interview, Stitzer said: “We are fixing our beverage business in America and, once we get it fixed, we certainly will look at the relative competitive advantage it has and the relative value it has.”
“We will make a determination from a strategic perspective whether we think that competitive advantage and value creation is going to be something that goes on ad infinitum, or relatively consistently into the future, or if it doesn’t,” he said.
Soft drink sales in North America account for 31% of Cadbury’s turnover and half of the group’s operating profits. Last year sales reached US$3 billion in the US, but Cadbury is still running a distant third behind Coca Cola and Pepsi. The company has tried to diversify its soft drinks business away from fizzy drinks, such as Dr Pepper and 7 Up, by acquiring fruit juice businesses such as Snapple and Mott’s.
Although Stitzer said that there were no plans to sell the US business, he made it clear that Cadbury would consider its options once efforts to improve performance had been made.
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By GlobalData
Should the company decide to demerge, options include floating the operation, and auctioning the business to private equity buyers. As US stock market ratings for quoted soft drinks businesses are relatively high, it is believed the former option would be most likely.
