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Introduction
Todd StitzerChief Executive Officer
3
Our Strategic Mission .. Creating Two World Class Businesses
1985 - 2007
• Creating two world class businesses
• Changing product and geographic participation
• Beverages: more focused but strengthened participation
• Confectionery: broader participation to become #1 globally
4
Our Journey Since 2003 .. Successful Strategic and Operational Execution
• Successfully integrated Adams and beat acquisition case
• Delivered Fuel for Growth
• Doubled historic revenue growth
• Consistently grown share in confectionery
• Successfully integrated DPSU, Mott’s and Snapple
• Consistently grown share in US beverages
• Transformed capabilities
• Maintained culture
5
.. A Few Setbacks …
• IT implementation
• Product recalls
• Nigeria accounting misstatements
• Commodity prices
6
.. Delivered Superior Returns for Our Shareowners
Source: Datastream
Cadbury Schweppes TSR against Peer Group 1997 - 2007
Cadbury Schweppes:
178% total return from
1997 -2007 YTD
0%
100%
200%
300%
400%
500%
600%
TS
R G
row
th
1997 – 2003TSR +68%
2003 – 2007TSR +82%
7
Beverages Separation Update
• Separation announced March 15
• Open dialogue with shareowners over an extended period
• Board considered separation for over 2 years
• Ability of confectionery and beverages to operate as stand-alone businesses and create value critical
• Separation proceeding well
• Significant tax planning to maximise value for shareowners
Fewer, Faster, Bigger, Better: Roadmap to Exploit Confectionery Platform
• Confectionery is an attractive, growing market
• We are market leaders with unrivalled strength and breadth of participation
• We have significant under-exploited opportunity
• Strategy in place and proven management team
• Greater focus on generating superior returns
Be the World’s Biggestand Best Confectionery Company
9
Today’s Agenda
Current trading
Confectionery plan overview
Growth priority
Break
Efficiency priority
Conclusion / Q&A
10
Current President, EMEA
New President, Britain, Ireland, Middle East and Africa (BIMA)
Matt Shattock
11
Jim Chambers
President, Americas
12
Rajiv Wahi
President, Asia Pacific
13
Chris van Steenbergen
Former Head of North, Central & Eastern Europe
New President, Europe
14
Tamara Minick-Scokalo
President, Global Commercial Strategy
15
Steve Driver
President, Global Supply Chain
16
David Macnair
President, Chief Science & Technology Officer
17
Bob Stack
Chief Human Resources Officer
18
Hank Udow
Chief Legal Officer and Company Secretary
19
Mark Reckitt
Chief Strategy Officer
20
Sir John Sunderland
Chairman
21
Trading Update
Current Trading
• Confectionery
- Q1 revenues up 9%
- Expect HI revenue growth at top end of new goal range
• Beverages
- Q1 revenues up 5%
Cadbury plc
23
Confectionery … A Large Market
2006 Packaged Food Retail Sales By Category
Bakery
Dairy
Other
SnacksFrozenDried
Confectionery
Chilled
Sauces
9%
Source: Euromonitor
A $137bnmarket
4th largestpackaged
foodmarket
24
Which is Growing Consistently
• Confectionery growing at 5% pa (up from 4%)
Ice Cream
Bakery
Dairy
Snacks
0%
1%
2%
3%
4%
5%
6%
7%
2002 2003 2004 2005 2006
2001 - 2006 Key Category Retail Sales Growth
Confectionery
Source: Euromonitor
25
2001-2006 Developed Market Annual Growth
Premium and Wellness Drives Growth in Developed Markets ..
Chocolate Candy Gum TotalConfectionery
• Premiumisation drives increase
in chocolate growth from ~2%
to 3%-4%
• Gum growth driven by
sugar-free (+8%)
Source: Euromonitor
3%
1%
5%
3%
26
2001-2006 Emerging Market Annual Growth
• Growth strong across all
categories
• Per capita consumption
significantly below developed
markets
• Affordability key to increased
penetration
Source: Euromonitor
12%
8%
12%
10%
Increasing Affluence and Growing Populations Drive Emerging Markets
Chocolate Candy Gum TotalConfectionery
27
The Market is Stable and Profitable for Leading Players
Consistent Growth .. Average of 5.1% pa since 2002
And Attractive Margins
Source: Annual reports
0%
5%
10%
15%
20%
25%
100
120
140
160
2002 2003 2004 2005 2006
Co
nfe
ctio
nery
Peers
U
nd
erl
yin
g R
even
ue G
row
th
(2002 =
100)
Co
nfe
ctio
nery
Peers
Un
derl
yin
g T
rad
ing
Marg
ins
28
A High Level of Impulse Sales and Low Own-Label Penetration
Share of Confectionery
Impulse Channel Private Label
United States 35%
UK 40% 7%
Japan 35% 2%
France 15% 8%
China 40% N/A
Brazil 85% 1%
Mexico 88% 2%
80%
2%
Russia N/A
Source: Euromonitor
Cadbury Confectionery: The World’s Largest Confectionery Business
Cadbury Mars Nestle HersheyWrigley Kraft Perfetti
9.0%8.1%
5.9%5.5%
4.2%
3.0%
Source: Euromonitor
9.9%
2005 Global Market Shares
30
The Only Total Confectionery Company
Source: Euromonitor
2005 $ share Total
CS/Adams 9.9%
9.0%
8.1%
Wrigley 5.9% - 3.0% 35.9%
5.5%
4.2%
Perfetti 3.0% - 6.2% 6.9%
Mars
Nestle
Hershey
Kraft
Chocolate Candy Gum
7.5% 7.2% 25.7%
14.8% 3.0% 0.1%
8.2% 2.7% 1.1%
7.7% - 0.1%
3.2%12.6% -
2006 Confectionery Revenue by Total Market Leadership Position
Leadership Built on Strong Number One and Two Market Positions
#2 position OtherMarket Leader
8%
26%
Cadbury Mars Nestlé Wrigley Hershey Ferrero Kraft
66%
Share Of Global Confectionery
Market In Which #1/#2
33% 32% 13% 8% 22% 17% 9%
Source: Euromonitor
Strong Presence in Faster Growing Categories
20% share of Wellbeing Confectionery
Wellbeing
2002-06CAGR
Market Cadbury
70%
30%
82%
18%
Other3%
7% = #1 Wellbeing candy brand
= #1 Wellbeing chocolate brand
= #2 Wellbeing gum brand
Ahead of market on Wellbeing in all categories
Source: Euromonitor
33
With the Largest Emerging Markets Business
10.3%
8.3%
5.5%5.1%
3.8%
2.6% 2.3%
0.8%
2005 Market Shareof Emerging Markets
Cadbury Nestlé Wrigley Kraft Mars Ferrero Hershey
• Emerging markets account for one third of our revenues
Perfetti
Source: Euromonitor
34
Which Underpins our Growth Ambition
4.7%
5.2%
3.5%
4.8%
5.7%
3.0%
3.2%
4.8%
Total Market
Kraft
Ferrero
Hershey
Wrigley
Nestlé
Mars
Cadbury
Implied Market, Cadbury and Peer Growth Rates
Source: Euromonitor
35
We Have Transformed Our Revenue Performance
Average Annual Organic Revenue Growth
Combined
5.6%
2003-06
AdamsCadbury
2.1%
1996-99 1999-03
2.9%
0.0%
1999-02
36
Driven By a Step Change in Innovation
2003-06 Confectionery NSV from Innovation
6.2%
10.1%
2003 2004
12.6%13.2%
2005 2006
37
And Successful Execution of Smart Variety
*2003-2005
CDM Revenue growth*
+10%
38
Global Share Gain to Become Number One
Organic Global Confectionery Share Change 2003-2005
Cadbury
0.3%
Wrigley
0.2%
Nestlé
0.2%
Kraft
0.2%
Perfetti
0.2%
Lindt
0.1%
Ferrero
-0.3%
Hershey
-0.5%
Mars
#1
#2
0.6%
Source: Euromonitor
With Share Gains in all Categories
2005 globalposition
2005 share 2003-05 change
Gum #2 25.7% +1.2%
Chocolate #5 7.5% +0.6%
Candy #1 7.2% +0.2%
Source: Euromonitor
The Challenge …From Biggest to Best
41
Our Margins Are Significantly Below Confectionery Peers
Source: Annual reports and Cadbury estimates
Cadbury0%
5%
10%
15%
20%
25%
Major Confectionery Peers 2006 Operating Margin
42
Driven By Our Business Complexity
• Organisational complexity
• Operations in 86 countries
• Many high cost, low volume plants
• Large range of brands
43
Commercial Complexity … Too Many Innovation Projects …
2006 Confectionery Innovation Pipeline
75%
20%
% potential NSV % projects
80%
25%
~ 800 projectsin total
44
… SKU Complexity in Scale Brands
• Halls: our biggest candy brand sold in over 25 countries
• Scale manufacturing: 5 plants account for 90% of volumes
• Margins impacted by innovation driven SKU proliferation
- ~350 SKUs
- 120 innovation projects
45
… And in Packaging
46
Opportunity to Improve Performance in Key Markets
UK
Russia
China
Nigeria
47
From Biggest to Best … Our Vision into Action
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
2.1 Reduce SG&A cost base
2.2 Reconfigure supply chain
2.3 Rationalise portfolio
2.4 Divest non-core assets & low-growth/high-cost businesses
2.5 Optimise capital management
3.1 Embed Building Commercial Capabilities
3.2 Invest in science, technology & innovation
3.3 Deliver preferred products at competitive cost
3.4 Streamline processes
3.5 Improve talent, diversity & inclusiveness
3. Capabilities: ensure world class quality
Performance Driven, Values Led
• Promote responsible consumption
• Prioritise quality & safety
• Ensure ethical & sustainable sourcing
• Nurture & reward colleagues
• Reduce carbon, water use & packaging
• Invest in communities
To Deliver Superior Shareowner Returns
SustainabilityCommitments
Culture
PerformanceScorecard
Priorities
GoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
48
To Deliver Superior Shareowner Returns
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
2.1 Reduce SG&A cost base
2.2 Reconfigure supply chain
2.3 Rationalise portfolio
2.4 Divest non-core assets & low-growth/high-cost businesses
2.5 Optimise capital management
3.1 Embed Building Commercial Capabilities
3.2 Invest in science, technology & innovation
3.3 Deliver preferred products at competitive cost
3.4 Streamline processes
3.5 Improve talent, diversity & inclusiveness
3. Capabilities: ensure world class quality
Performance Driven, Values Led
To Deliver Superior Shareowner Returns
SustainabilityCommitments
Culture
PerformanceScorecard
Priorities
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
• Promote responsible consumption
• Prioritise quality & safety
• Ensure ethical & sustainable sourcing
• Nurture & reward colleagues
• Reduce carbon, water use & packaging
• Invest in communities
GoverningObjective
49
The Biggest and Best Confectionery Company
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
2.1 Reduce SG&A cost base
2.2 Reconfigure supply chain
2.3 Rationalise portfolio
2.4 Divest non-core assets & low-growth/high-cost businesses
2.5 Optimise capital management
3.1 Embed Building Commercial Capabilities
3.2 Invest in science, technology & innovation
3.3 Deliver preferred products at competitive cost
3.4 Streamline processes
3.5 Improve talent, diversity & inclusiveness
3. Capabilities: ensure world class quality
Performance Driven, Values Led
To Deliver Superior Shareowner Returns
SustainabilityCommitments
Culture
PerformanceScorecard
Priorities
GoverningObjective
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
• Promote responsible consumption
• Prioritise quality & safety
• Ensure ethical & sustainable sourcing
• Nurture & reward colleagues
• Reduce carbon, water use & packaging
• Invest in communities
Vision
50
Our New Financial Scorecard
Be the World’s BIGGEST and BEST Confectionery Company
To Deliver Superior Shareowner ReturnsGoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Total confectionery share gain
• Mid-teen trading margins by end 2011
• Strong dividend growth
• Efficient balance sheet
• Growth in ROIC
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROICPerformance
Scorecard
51
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
Delivered Through Focus on Growth …
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
3. Capabilities: ensure world class quality
To Deliver Superior Shareowner Returns
PerformanceScorecard
GoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
Priorities
52
2.1 Reduce SG&A cost base
2.2 Reconfigure supply chain
2.3 Rationalise portfolio
2.4 Divest non-core assets & low-growth/high-cost businesses
2.5 Optimise capital management
Efficiency …
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
3. Capabilities: ensure world class quality
To Deliver Superior Shareowner Returns
PerformanceScorecard
GoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
Priorities
53
3.1 Embed Building Commercial Capabilities
3.2 Invest in science, technology & innovation
3.3 Deliver preferred products at competitive cost
3.4 Streamline processes
3.5 Improve talent, diversity & inclusiveness
Capabilities ….
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
3. Capabilities: ensure world class quality
To Deliver Superior Shareowner Returns
PerformanceScorecard
GoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
Priorities
54
Sustainability and Culture
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
2.1 Reduce SG&A cost base
2.2 Reconfigure supply chain
2.3 Rationalise portfolio
2.4 Divest non-core assets & low-growth/high-cost businesses
2.5 Optimise capital management
3.1 Embed Building Commercial Capabilities
3.2 Invest in science, technology & innovation
3.3 Deliver preferred products at competitive cost
3.4 Streamline processes
3.5 Improve talent, diversity & inclusiveness
3. Capabilities: ensure world class quality
Performance Driven, Values Led
To Deliver Superior Shareowner Returns
PerformanceScorecard
Priorities
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
• Promote responsible consumption
• Prioritise quality & safety
• Ensure ethical & sustainable sourcing
• Nurture & reward colleagues
• Reduce carbon, water use & packaging
• Invest in communities
GoverningObjective
SustainabilityCommitments
Culture
55
1. Growth: fewer, faster, bigger, better
fewer … More scale projects… focus where it matters…more consistent execution
faster … Increase speed to execute and roll-out winninginnovation
bigger … Substantial scale and scope
better … Leveraging consumer insights to drive advantage andprofitable growth
Our First Priority: Growth
56
1. Growth: fewer, faster, bigger, better
… Focus on Five Core Initiatives
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
57
Category Focus for Scale and Simplicity Through Organisation
• Global category structure created in 2006
• Focus on chocolate, candy and gum
• Structure mirrored in regions…
• …and functions
58
Focus on Fewer Markets ... Our Top Twelve Markets
• Focus on key markets: 7 chocolate, 10 candy, 9 gum
• 60% of global confectionery market and 60% of forecast growth
US UK Mexico Russia India China Brazil France S. Africa Australia Japan Turkey
1Gum 2 2 1 2 5 1 1 2
1
2
1
513
3
5
Chocolate 1 8 7 1
Candy 4 1 2 12 3
Source: Euromonitor AC Neilsen/IRI
59
Bigger, Better Innovation … in Gum
• Launched in 2005 in 6 markets
• Rolled out to 16 markets
• Captured significant share in most markets
• Recent success in UK, Russia, Turkey, Mexico
• On track for £200m revenues in 2007
60
Leveraged Across Affinity Markets
• Built a greater understanding of our consumers
• More commonality than expected
• Can design common positioning and products across larger global segments
• Greater ability to leverage insights, product platforms and innovation
• Roll-out of initiatives from lead markets to affinity markets
61
Refocusing and Revitalising in GB
2000 – 2004
• Cadbury and Trebor Bassett merged in 2000/2001
• Savings invested in growth
• 2002 – 2004 revenues +5% pa; high margins maintained
• Successful revitalisation of core CDM brand
2005 - 2006
• Significant management focus on PROBE and product recalls
• Loss of focus on commercial execution
• 2005/2006 revenues flat and margins down
• 2007 share impacted by recall and less discounting
62
.. To Drive Improved Commercial Performance and Returns in GB
• Fundamentally strong business: iconic brands, strong RTM and leadership scale advantage
• Renewed commercial focus and investment to revitalise performance
• Significant margin opportunity from reduced complexity
• Organisational change to drive performance
- Direct control of CEC member: Matt Shattock
- New managing director: Trevor Bond
- Closer commercial alignment with Ireland
- Greater commercial and manufacturing alignment
63
Focus to Improve Performance in Russia
• The business has grown rapidly
• Number two in gum; number one medicated brand; number 7 in chocolate
• But lack of category scale and high cost route to market
• Business remains unprofitable
• Significant improvements in profitability through greater focus
• Focus on core gum and candy through Dirol and Halls
• Focused participation in chocolate through Picnic and gifting
• Increase efficiency of route to market
64
… China ...
• Lack of category and geographic focus
• Business is unprofitable and losing share
• Focus on:
- Two strong and under-exploited brands: Halls and Choclairs
- Top 17 cities with 60% of revenues: exit from around 180
• Restructuring route to market: more focus on modern trade and investment in traditional trade
65
And Nigeria
• Late 2006, announced discovery of multi-year mis-statement of financials
• Building a new management team
• Confident profitability can be restored
- Focus on strong TomTom and Bournvita brand equities
- Tight cash management
- Putting in place foundations for future growth
66
1. Growth: fewer, faster, bigger, better
… Drive Advantaged, Consumer Preferred Brands and Products
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
67
+1200bpsMargins
vs Rest of Portfolio
9%
Growth
50%
NSV
Focus on Advantaged Brands to Drive Profitable Growth
68
Five Focus Brands Under Global Brand Management
Our three biggest brands with global scale
Smaller emerging brands aligned to consumer trends
69
Green & Blacks +30%
Dark Chocolate
Global Growth at
13%
Focus on Consumer Growth Trends …. Through Green & Blacks
“Natural is better”
• Growth in “For Me” indulgence
• Cocoa benefits
• Premium pricing
Source: Euromonitor
70
And The Natural Confectionery Company
TNCC: a compelling proposition Average growth of 25% pa since acquisition
• Australia: number one bagged candy: 9% share total candy category
• New Zealand: 8% share total candy increasing total candy share to 38%
• Ireland: number one bagged candy
• UK: launch 2Q 2007
‘It tastes good, it is good, I FEEL good about choosing it and sharing it with my family’
71
Leveraging Strong Regional and Local Brands Through Common Platforms
Centre Filled Gum Longer Lasting Flavour
72
Building Consumer Preference in US Gum
US consumer preference vs. Wrigley on 6 key products
Inferior
Parity
Inferior
Parity
Inferior
No data
Superior
Superior
Superior
Superior
Superior
Parity
2003 2006
To Drive Share Growth
US gum market share 2003-2007 YTD
Product improvement and preference programmes underway in each category to drive share growth
20
22
24
26
28
30
32
34
36
Jan ‘04 Jan ‘06
US G
um
Mar
ket
Shar
e (%
)
May ‘07
74
And in Indulgent Candy in India
Establishing product superiority pre-launch
Performance in India post-launch
CDM Crunch Alpenliebe
Liking
Uniqueness
Purchase Intent
Preference
7.58.1
2.4
4.6 4.4
77%
1.6
23%
30%
20%
10%
0%
Jun Jul Aug Sep Oct Nov Dec
Alpenliebe
CDM Eclairs Crunch
Share Of Hard Candy
2006 Period
75
1. Growth: fewer, faster, bigger, better
… Accelerate White Space Market Entry Via Smart Variety
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
76
Total Confectionery Strength
Dual Category Strength
Single Category Strength
Entry Level
1 2 3
Category Participation
Exploiting the Breadth of Our Participation
US
JAPAN
AUS
MEXICO
UK
SA
FRANCE
RUSSIA
CHINA
BRAZILINDIA
77
A Significant Growth Opportunity
White space markets which CS could leverage = 50% of global market
Chocolate Candy Gum
57%
51%
13%
Source: Euromonitor
78
Successful Launch of Gum in the UK …Share Gain
• Share comfortably above 10% after 20 weeks
0
4
8
12
16
Trident Share of UK Gum Market
Week 1 Week 20
Val
ue
share
of gum
%
Source: IRI
And Strong Market Growth
-5
0
5
10
15
20
2005 2006 2007YTD
UK Gum Market Growth by Value 2005 - 2007
Val
ue
Gro
wth
(%
)
• 20% market growth since launch
• Second wave of activity planned for 2H
80
Leveraging Our Hot Zone Route to Market in France
Dec-06 Jan Feb Mar Apr
• Integrated launch
• 8% share of pocket candy after 5 months
1.7%2.1% 2.0%
4.7%
7.6%
Source: Hall & Partner Tracking Data, May 2007
81
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
1. Growth: fewer, faster, bigger, better
… Create Advantaged Customer Partnerships
82
Impulse
>50%
Revenues
Focus on Global Customers
Impulse in developedTraditional trade in emergingInternational Travel Retail
Global
>10%
Revenues
83
Ability to Leverage Global Customers
• Only major player with expertise across all three categories
• More total leadership positions in top retailers key markets than competitors
Source: Euromonitor
Confectionery Leadership Positions In Top Global Retailers’ Key Market
Wal-mart
Carrefour 8 1 2 4 0
Tesco 3 0 2 3 0
Cadbury Mars Nestle Wrigley Hershey
4 0 0 1 1
84
Winning Insights in North America
• Customer
- Six fold increase in sales and conversions
• Cadbury Schweppes
- 20% increase in checkout revenues
- 15% increase in total store revenues
- 300bps decrease in trade spend
Who is the shopper?
Study and prioritise customers’ needs
1
Test breadth of categories to determine best mix
3
2
Work with store to optimisefront-end design
4
85
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
1. Growth: fewer, faster, bigger, better
Expand Platforms Through Acquisition
86
Cadbury Mars Nestle Wrigley (IncKraft
Candy)
Hershey Ferrero Kraft (ExcUS Candy)
Perfetti VanMelle (Inc
ChupaChups)
2005 Global Market Shares
9.9%9.0%
8.1%
5.9% 5.5%
4.4% 4.2%
3.0%
Global Confectionery: An Unconsolidated Market
Source: Euromonitor
2003 – 2006 Bolt-On Acquisitions Strengthen Existing Positions
Green & Blacks
Kent Minority
TNCC All natural confectionery
Largest candy business in Turkey
Strong franchise in premium chocolate
2003-2006
Dan Products #1 gum business in South Africa
Recent Bolt-On Acquisitions Further Strengthen Positions
Intergum
Kandia-Excelent
Sansei Functional candy in Japan
#2 confectionery company in Romania
#1 gum business in Turkey strengthens supplyhub for Europe / Middle East / Asia
Focus on Value-Enhancing Bolt-on Acquisitions
89
Organisational Change
• Increased level of centrally driven, more competitively advantaged projects
• Greater focus on allocation of resources
• Flattening of organisational structure to reduce complexity and duplication
Transition from Locally to Centrally Led Organisation .. 1998 to 2006
1998 2000 2003/04 2006/07
Managing for Value
Creation of functions and regions
Consolidation Of Functional And Regional Structure
Creation of Category Structure
• Globally mandated approach to strategic and business management
• Creation of 9 major business units / regions reporting centrally
• Creation of global supply chain, IT and commercial functions
• Continuing high level of local autonomy
• Consolidation of business units under 5 regions
• Shift of power to functional and regional level
• Creation of global S&T function to drive focus on innovation
• Creation of 3 confectionery categories operating alongside 4 confectionery regions
• Central management of 5 global brands
2007 Organisational Change to Drive Growth and Returns
• Key global brands to be managed centrally through category organisations
• Flattening organisational structure to remove duplication and overheads
Increased central co-ordination of growth initiatives
15% reduction in headcount
15% reduction in manufacturing sites
92
• Creation of four regions: EMEA split into two to reduce span of control and increase focus
• Clustering within regions to reduce number of BUs and increase focus
• Co-locating global, regional and BU head offices
• Double-hatting functional and regional leaders
• Strengthening role of category teams
• New role of global performance director to drive delivery of SG&A and supply chain reconfiguration
2007 Organisational Change to Drive Growth and Returns
Financial Review
Ken HannaChief Financial Officer
3
Agenda
• Beverages separation update
• Cadbury plc – overview of confectionery business
• Efficiency priorities – margins
• Capital structure
4
Beverages Separation
• Dual track process (sale and demerger)
• ‘Leading’ with a sale
• Information memorandum issued
• Minimal dis-synergies in Cadbury plc
• Tax differential minimal
• Total tax & transaction costs likely to be around 5% of valuation
Overview
5
Beverages Separation
• Expected return of capital to shareowners
- Tax and transaction costs
- Proportion of Group debt
- Pension contributions
• Precise form and structure to be confirmed with separation details
Use of Proceeds
6
Beverages Separation
• Current trading in line with expectations
• Other factors
- Glaceau distribution
- US GAAP vs IFRS
- Stand alone costs
7
Analysis by Region
• EMEA splits into two regions
Analysis by Category
• Confectionery is 92% of revenue
Cadbury plc Overview2006 Revenue £5 billion
Asia Pacific25% Americas Confy
27%
Europe17%
BIMA31%
ANZ Beverages8%
Chocolate40%
Gum28%
Candy24%
8
Our New Financial Scorecard
Be the World’s BIGGEST and BEST Confectionery Company
To Deliver Superior Shareowner Returns
PerformanceScorecard
GoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
• Organic revenue growth of 4%-6% pa
• Total confectionery share gain
• Mid-teen trading margins by end 2011
• Strong dividend growth
• Efficient balance sheet
• Growth in ROIC
Revenue Growth
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2003 2004 2005 2006
Underlying Cadbury plc Revenue Growth
CAGR 2003 – 06Reported 5.6%
4.2%
6.5%6.2%
3.4%
5.6% ex-UK
10
Revenue Growth
Revenue Growth 2003-2006
Confectionery Growth Target of 4-6% per Annum Supported by Category & Geographic Positions
2003-2006
100%
EmergingMarkets
56%
Gum 26%
Chocolate 15%
Gum 28%
Chocolate 20%
Candy -4%
Candy 15%
DevelopedMarkets
44%
Annual global category growth circa 5%
11
Our New Financial Scorecard
Be the World’s BIGGEST and BEST Confectionery Company
To Deliver Superior Shareowner Returns
PerformanceScorecard
GoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
• Organic revenue growth of 4%-6% pa
• Total confectionery share gain
• Mid-teen trading margins by end 2011
• Strong dividend growth
• Efficient balance sheet
• Growth in ROIC
12
Operating Margin
£’m Revenue UOP*
1,073
(584)
489
648
(159)
489
7,427
(2,566)
4,861
4,853
8
4,861
Margin*
Cadbury Schweppes Group 14.4%
Less CSAB
Cadbury plc 10.1%
Confectionery regions 13.4%
Central and plc costs 100% of group (3.3%)
Cadbury plc 10.1%
* Pro-forma margin is shown before underlying restructuring
Pro-forma Underlying Operating Margin for 2006
13
Operating Margin
2003* 2006
-210bps
9.1%10.1%
+400bps
Fuel for Growth
Mix &Leverage
Input Costs
GrowthInvestment
+220bps
UK/Nigeria One-offs
13.2% -210bps
-90bps
Cadbury plc Historic Margin Progression 2003-06
* Pro-forma adjustment made to 2003 to reflect transition from UK GAAP to IFRS
14
0%
5%
10%
15%
20%
25%
Category-Weighted Average ex-Cadbury
15%
• Historic margin performance is below category-weighted average
• Margin opportunity in mid-teens
Source: Annual reports and Cadbury estimates
Operating MarginRelative to Confectionery Peers
2006 Operating Margin
Gum
Candy
Chocolate
20.3%
18.5%
15.0%
11.5%11.5%10.1%
8.9%
Cadbury
15
Operating Margin
2006 2011
10.1%
Mid-teensMid-teens by 2011
2 key questions
• Why is the operating margin where it is?
• What are we going to do to improve it?
16
Operating Margin
Key factors
• Significant differential in SG&A versus peers
• Complex supply chain
• Underperforming markets
• ‘Catch Up’ investment behind growth and capabilities
• 100% allocation of central costs on separation
Why is the Operating Margin where it is?
17
Operating Margin
Average exclCadbury13.1%
Source: Annual reports
Significant Differential in SG&A versus Peers
2006 SG&A Costs as a Percentage of Revenue
16%
Cadbury
12.2% 12.7%14.3%
18
Operating Margin
Americas Confy
BIMA Europe Asia Pacific
1,205
15
30
80
40
1,500
12
26
Rev/country unit in £’m 74 125 20 57
58
818
41
15
55
2006 Revenue in £’m 1,330 4,861
No of production sites 10 81
No of country units
Revenue/production site
Total
18 86
133 60
Complex Operating Structure
19
Operating Margin
Underperforming Markets
• GB&I
• 3 emerging markets
- Russia
- China
- Nigeria
20
Operating Margin
Components of 2006 Central Costs
• 100% of central costs initially
remain with Cadbury plc on
separation
• Americas Beverages costs
specifically allocated
• Plans in place to downsize
post-separation
• Central costs in 2003 adjusted for pro-forma IFRS: £143m
Central and plc Cost Base
1.1% of Revenue
ConfyGrowthCosts
2.2% of Revenue
£159m
Plc andCentralCosts
21
Operating Margin
2006 2011
10.1%
• Why is the operating margin where it is?
- Complex operating structure
- No of country units/ no of brands/no of manufacturing sites
- Underperforming markets
- Catch up growth investment
- Central and plc costs
• What are we going to do to improve it?
Mid-teens by 2011Mid-teens
22
Cadbury plc Efficiency Priorities
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
2.1 Reduce SG&A cost base
2.2 Reconfigure supply chain
2.3 Rationalise portfolio
2.4 Divest non-core assets & low-growth/high-cost businesses
2.5 Optimise capital management
3. Capabilities: ensure world class quality
To Deliver Superior Shareowner Returns
PerformanceScorecard
Priorities
GoverningObjective
Vision
2.1 Reduce SG&A cost base
2.2 Reconfigure supply chain
2.3 Rationalise portfolio
2.4 Divest non-core assets & low-growth/high-cost businesses
2.5 Optimise capital management
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
23
Efficiency Priorities - Cost
£m
Cash 400
Non-cash restructuring 50
Total reconfiguration 450
Reconfiguration capex (2007,2008,2009) 200
Total investment to deliver efficiency agenda 650
Summary of Investment 2007-2011
Ongoing underlying spend
• Restructuring c0.5% of revenue
• Capital expenditure c5% of revenue
24
Efficiency Priorities - Overview
Savings from Cost Reduction
• Significant opportunity to improve
margin through cost reduction
• Total programme
- Site closures – 15%
- Headcount reductions - 15%
SG&A
Supply Chain
100%
SG&A - Centre
25
Efficiency Priorities – SG&A
• Streamlining Structures
- Downsizing regional teams
- Category-based structures focussed on driving major innovations in core markets
- Clustering country units to eliminate duplicated activities and improve efficiency – eg.
• USA/Canada
• Brazil/Argentina
Overview of Programme
26
Efficiency Priorities – SG&A
• Extending Shared Business Services & Outsourcing
• Data centre outsourcing with Hewlett Packard announced 2007
• Global partnership with Genpact announced in 2006
- Finance and accounting processes being outsourced to their centres in India, Romania & China
• IT Transformation programme will reduce size of IT organisation through consolidation, efficiencies & outsourcing
Overview of Programme
27
Efficiency Priorities – SG&A
• Savings to be generated through
- Head office relocation from Berkeley Square
- Outsourcing HR/finance functions to SBS
- Downsizing of central teams
- Reduction in consultancy fees etc
• £50m total savings identified
- Timing 2008/2009
Central Cost Opportunity
28
Chocolate
2006 Number of Sites by Region
• 81 manufacturing sites at end 2006
• 6 sites sold/identified for sale
• 3 sites acquired
• Efficiency Agenda includes closure
of further 15% of sites over
2008-2011
Efficiency Priorities – Supply Chain
AmericasConfy
BIMA Europe Asia Pacific
Reconfiguring Supply Chain to improve Productivity and Reduce Complexity
Ingredients Candy/Gum Beverages
532
7
4
8
8
13
12
11
8
29
Efficiency Priorities – Supply Chain
• Direct & indirect cost savings from
- Productivity initiatives across all manufacturing sites
- Complexity reduction
• Increased outsourcing
- Memorandum of understanding with Barry Callebaut
- Improved efficiency and technical expertise
- Financial benefits primarily capex avoidance and ROIC improvement
• Increased low cost country sourcing
- Eastern Europe, Asia and South America teams established
Improving Productivity and Reducing Complexity
30
Efficiency Priorities – Supply Chain
• Since 2003 we have:
- Increased S&T resources
- Established innovation agenda
- Doubled historic growth rate
• Prepared to sacrifice small amount of growth by
- De-emphasising/exiting several low-margin products and brands
- Rationalising sku’s
• Revenues representing around 5% of Cadbury plc will be potentially impacted
• Will result in improved manufacturing efficiencies and margin
Portfolio Rationalisation is a Key in Improving Margins
31
Efficiency Priorities – Underperforming Markets
£’m Total
Combined performance from Russia/Nigeria/China
2006 Revenue 200
2006 Underlying Operating Loss
2006 Operating Margin
(26)
(13%)
Fixing 3 Emerging Markets
• Restoring to breakeven is worth c60bps on operating margin
32
Efficiency Priorities – Programme Assurance
• Co-ordinating and managing change under efficiency agenda
- SG&A
- Central costs
- Supply Chain Reconfiguration
• Drawing on learnings from previous successful change - such as Adams integration and Fuel for Growth – to drive efficiency
• Reporting to CFO
Global Performance Director to Assure Implementation of Savings
33
Positive Mix and Leverage
Growth
Gum
Functional Candy
Chocolate
Margin
Faster Growth from Higher Margin Categories
34
Reinvestment Behind Growth
• Growth investment now at acceptable and benchmark levels
• Investment will continue to increase in line with revenue
- Marketing
- In-store promotions
- Slotting/listing fees
- Innovation/product formulation
- Science & Technology
- Route to Market
35
Mid-teens Margin by 2011
2006 2011
10.1%
• Central Costs
• SG&A
• Supply Chain
• Mix/Leverage
• Portfolio Rationalisation
• Underperforming Markets
• Reinvestment
• Cost Headwinds
Mid-teens
36
Our New Financial Scorecard
Be the World’s BIGGEST and BEST Confectionery Company
To Deliver Superior Shareowner Returns
PerformanceScorecard
GoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
• Organic revenue growth of 4%-6% pa
• Total confectionery share gain
• Mid-teen trading margins by end 2011
• Strong dividend growth
• Efficient balance sheet
• Growth in ROIC
37
Capital Management
• 2007/08 dividend per share (post consolidation) at level consistent with current expectations for existing CS Group
• Expect to continue to grow dividends whilst increasing cover - payout ratio 40%-50%
• Payout ratio for 2007/08 likely to be above long term level
• Dividend profile remains approx ⅓ interim and ⅔ final
• Phasing of earnings from c 40:60 in 2006 to 35:65
Strong Dividend Growth
Capital Management
Rating BBBA+ A+ A+ AA+A+n/a AAA
2006 Net Debt : EBITDA Ratio
Efficient Balance Sheet
2.2x
1.7x
0.8x 0.7x
0.6x
-0.3x
1.2x 1.3x
1.6x
Lindt
Reckitt Wrigley Nestle Unilever Danone Hershey Kraft CS Group
39
Capital Management
• Maintain objective of BBB+ credit rating
• Following separation net proceeds will be returned
• Flexibility for limited amount of bolt-on acquisitions
• Net debt assumption of Cadbury plc in the range of 1.75-2.0 x EBITDA
• Consider returning funds to shareowners at the appropriate time
Efficient Balance Sheet
40
Disciplined Capital Allocation
£’m Total
Disposal Proceeds
Europe Beverages 1,270
CSBG 650
Confectionery acquisitions 130
Other non-core disposals 160
Acquisition Costs
1,430
780
Summary of M&A Activity: 2004-2006
• 2003 Net Debt: EBITDA 3.9x
• 2006 Net Debt: EBITDA 2.2x
41
35
40
45
50
55
60
65
2003 2004 2005 2006
Days
Working Capital
Average Working Capital Days
Disciplined Capital Allocation
Group Confectionery
42
Capital Management
• Continuing focus on cash generation and growth in ROIC
• Key drivers of ROIC
- Profit growth - margin enhancement & revenue momentum
- Disciplined capital allocation
- Rigorous financial management
• Separation of Beverages will initially dilute ROIC
Growth in ROIC
43
Capital Management
• Significant goodwill/intangibles balance – circa £3.7bn
- ROIC on Adams acquisition is ahead of WACC
- Number of acquisitions (1980’s/1990’s) have lower returns
• Cadbury plc pro-forma 2006 ROIC (excluding central costs)
- Excluding goodwill/intangibles 33%
- Including goodwill/intangibles 8%
• Performance in line with revenue and margin targets will deliver significant progression over 2007-2011
Growth in ROIC
44
Conclusion
Be the World’s BIGGEST and BEST Confectionery Company
1. Growth: fewer, faster, bigger, better
2. Efficiency: relentless focus on cost & efficiency
1.1 Category focus for scale & simplicity
1.2 Drive advantaged, consumer preferred brands & products
1.3 Accelerate ‘white space’ market entry via Smart Variety
1.4 Create advantaged customer partnerships via total confectionery solutions
1.5 Expand platforms through acquisition
2.1 Reduce SG&A cost base
2.2 Reconfigure supply chain
2.3 Rationalise portfolio
2.4 Divest non-core assets & low-growth/high-cost businesses
2.5 Optimise capital management
3.1 Embed Building Commercial Capabilities
3.2 Invest in science, technology & innovation
3.3 Deliver preferred products at competitive cost
3.4 Streamline processes
3.5 Improve talent, diversity & inclusiveness
3. Capabilities: ensure world class quality
Performance Driven, Values Led
To Deliver Superior Shareowner Returns
SustainabilityCommitments
Culture
PerformanceScorecard
Priorities
GoverningObjective
Vision
• Organic revenue growth of 4%-6% pa
• Mid-teen trading margins by end 2011
• Total confectionery share gain
• Efficient balance sheet
• Strongdividendgrowth
• Growth in ROIC
• Promote responsible consumption
• Prioritise quality & safety
• Ensure ethical & sustainable sourcing
• Nurture & reward colleagues
• Reduce carbon, water use & packaging
• Invest in communities
45
Summary
Increased revenue growth
Relentless focus on cost and efficiency
Disciplined capital allocation
Supplementary Schedules
47
Historical Financial Performance
£m 2003 2004 2005 2006
Revenue
n/a
n/a
2,033
871
937
10
Total 3,851 4,326 4,651 4,861
3.4%
BIMA 1,370 1,420 1,500
Americas Confectionery 1,093 1,228 1,330
803
EMEA 2,173 2,257 2,318
Central 10 9 8
1,050
Underlying LFL Growth 6.2%
Europe 837 818
6.5% 4.2%
Asia Pacific 1,157 1,205
2003 & 2004 restated for discontinuation of Bromor (sold in 2006)
48
Historical Financial Performance
£m 2003* 2004 2005 2006
Underlying Operating Profit
n/a
n/a
271
96
125
(143)
349
BIMA n/a n/a n/a
Americas Confectionery 143 172 207
n/a
EMEA 316 328 276
Central (149) (156) (159)
134
Total 444
Europe n/a n/a
501 489
Asia Pacific 157 165
2003 & 2004 restated for discontinuation of Bromor (sold in 2006)*2003 numbers represent UK GAAP balances adjusted to reflect the IFRS adjustments made to 2004 financials
49
Cadbury Confectionery
£m 2003 2004 2005 2006
Total Revenue 3,851
492
(143)
349
12.8%
UOP Margin 9.1% 10.3% 10.8% 10.1%
4,326 4,651 4,861
Central Costs (149) (156) (159)
UOP Margin pre-Central Costs 13.7% 14.1% 13.4%
Underlying Operating Profit 444 501 489
593Underlying Region Operating
Profit 657 648
Historical Financial Performance
2003 & 2004 restated for discontinuation of Bromor (sold in 2006)*2003 numbers represent UK GAAP balances adjusted to reflect the IFRS adjustments made to 2004 financials
50
Efficiency Priorities – Supply Chain
No of sites* Ingredients Chocolate Candy Gum
17
(5)
Acquired/built - - 1 1 2 4
2007 acquisitions 1 1 1 3
14
-
15
8
-
8
-
8
21
(1)
21
(1)
21
2002 pre FfG 8 34
(5)
30
(5)
26
88
Non-core disposals - (6)
Closed/sold 2003-6
As at y/e 2006
Revised base
ANZ Bevs Total
- (11)
8 78
8 81
Supply Chain Configuration
• Site numbers are higher than those shown in 2006 report and accounts as this analysis includes sites which are not 100% owned
51
Efficiency Agenda – Supply ChainReconfiguring Supply Chain
Chocolate GumCandy Multi Production Site