Word: peppers
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Dates: during 2000-2009
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Under relentless pressure from shareholders like agitator Nelson Peltz to sell its beverage business--yet unable to find a buyer given the collapse of the credit markets--Cadbury spun off its soft-drinks unit as the Dr Pepper Snapple Group earlier this year, leaving it once again a stand-alone candy company. And a relatively diminished one. Cadbury was dethroned as the king of candy by the surprise buyout of Wrigley by Mars, giving Mars-Wrigley a 14.4% share of the global confectionery market, compared with Cadbury's 10.1%, according to Wachovia Capital Markets...
Over the years (the company dates to 1824, when John Cadbury, a Quaker in Birmingham, England, opened a shop selling tea, coffee and chocolate), Cadbury has snapped up some impressive brands, including such names as Dr Pepper, 7Up, A&W, Canada Dry, Sunkist and Snapple, which came as part of its merger with Schweppes in 1969. On the candy side, it was Stitzer's 2003 acquisition of Adams, which included the Halls, Dentyne and Trident brands, that transformed Cadbury into the world's largest confectionery company...
...beverage side, Cadbury was equally handicapped. The company sold its rights to Dr Pepper outside North America to rival Coke and Lion Blackstone in 1999, which made it difficult to compete head to head with international powerhouses like Pepsi--and Coke. "We really can't go back on the deal," says Larry Young, a 30-year Pepsi veteran who was coaxed out of retirement to head the beverage business. "I don't think you'd ever get Coke to sell it back. If I were them, I wouldn...
...Pepper also has old distribution deals with Coke and Pepsi bottlers, which Goldman Sachs analyst Judy Hong describes as a "potential Achilles' heel." According to Hong, "there is an inherent conflict of interest because Pepper's distribution platforms are also its largest competitors'," and as an example, she cites Pepsi's Sierra Mist displacing 7Up as the No. 2 lemon-lime brand, behind Sprite, in part because Pepsi Bottling stopped distributing...
That makes the newly spun-off Dr Pepper Snapple Group a bit of a soft-drink Frankenstein, cobbled together from odd parts. Dr Pepper has acquired about $1.2 billion in bottling assets over the past two years, and that will likely continue, which bodes well for its longer-term outlook, says Wachovia analyst Brian Scudieri. Young is predicting that the Dr Pepper Snapple Group will deliver annual revenue growth of 3% to 5% and earnings-per-share increases in the high single digits over the next few years...