Introduction - Investis CMSfiles.investis.com/cadbury_ir/2007InvestorUpdate.pdf · TSR Growth 1997 – 2003 TSR +68% 2003 – 2007 ... Bob Stack Chief Human Resources Officer. 18

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
























Culture


Priorities

Vision






• Growth in ROIC







GoverningObjective

49

The Biggest and Best Confectionery Company























Culture


Priorities

GoverningObjective






• Growth in ROIC







Vision

50

Our New Financial Scorecard


To Deliver Superior Shareowner ReturnsGoverningObjective

Vision




• Strong dividend growth


• Growth in ROIC






• Growth in ROICPerformance

Scorecard

51






Delivered Through Focus on Growth …







GoverningObjective

Vision






• Growth in ROIC

Priorities

52






Efficiency …







GoverningObjective

Vision






• Growth in ROIC

Priorities

53






Capabilities ….







GoverningObjective

Vision






• Growth in ROIC

Priorities

54

Sustainability and Culture























Priorities

Vision






• Growth in ROIC







GoverningObjective


Culture

55


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


… Focus on Five Core Initiatives






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


… Drive Advantaged, Consumer Preferred Brands and Products






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


… Accelerate White Space Market Entry Via Smart Variety






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







… 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







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


• 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


• 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





GoverningObjective

Vision






• Growth in ROIC






• 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





GoverningObjective

Vision






• Growth in ROIC






• 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












Priorities

GoverningObjective

Vision











• 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


• 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


• 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


• 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


• 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





GoverningObjective

Vision






• Growth in ROIC






• 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























Culture


Priorities

GoverningObjective

Vision






• Growth in ROIC







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


£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


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


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

Documents

Introduction - Investis CMSfiles.investis.com/cadbury_ir/2007InvestorUpdate.pdf · TSR Growth 1997 – 2003 TSR +68% 2003 – 2007 ... Bob Stack Chief Human Resources Officer. 18