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A case study of Cadbury Schweppes.

Extracts from this document...

Introduction

Introduction Cadbury Schweppes is a global company which manufactures markets and distributes two closely products: beverage and confectionary, in almost 200 countries with over 36,000 employees world-wide. The headquarter is in London, the UK It is the world's third largest soft drink company which has got bottle manufactures in 10 countries .It has a lot of brands that we are familiar with such as: Schweppes, 7-up, Dr. Pepper, Mott's and Snapple in North America, and Spring Valley in Asian and Africa. It is also the world's fourth largest confectionery company, which mainly supplies Cadbury, Trebor, Fry's, Pascell, Red Tulip and Cottee's. Recently, it is not just presenting chocolate but also sugar and chewing gum. Main body History Cadbury Schweppes is merged by two companies which named Cadbury Ltd and Schweppes Ltd respectively, and listed on the London Stock Exchange in 1969. It continued the world-wide expandable programmes of these two companies. After 17 years, the company moved its American Depository Shares to the New York Stock Exchange under the ticker symbol "CSG" and just 3 years later, it was listed on the Melbourne Stock Exchange in Australia because of the fast growth of overseas business. Until 1993, Cadbury Schweppes had achieved a market capitalisation of £4.3 billion. Development Jean Jacob Schweppes, which was born in Witzenhausen, Germany is the origin of Schweppes. It was opened as a sole trader in 1740 and entered into a partnership to expand the business and established a factory in London, England in1790. There was only one owner of Schweppes when it was sole trader and two for partnership. This situation led to small scale of Schweppes, which caused higher average cost than bigger company. Therefore, the mainly objective of the sole trader and partnership Schweppes is to earn its living. It didn't change a lot when it became partnership from sole trader. Owners, whatever only John or with his partner, had to take unlimited liability for their company, while they could get all the profits. ...read more.

Middle

In France, the reasons for rising were that Hollywood business was proceeding and sugar-free gum was launched. In conclusion, the most important part of the growth was by adding a number of brands and businesses, such as: Slush Puppie and Carteret in the US, Spring Valley and Wave in Australian and Mantecol in Argentina. There are more detailed information in the Balance sheet and Group Profit and Loss Account, which we can calculate some ratios to measure whether the business of Cadbury Schweppes in 2001 was better than 2000 The profit margin ratio declined from 15.8% to 14.8%. The result indicates that the company got less profit for each product than 2000. The reasons for the decline is the over expenses-goodwill amortisation and major restructuring cost, which were both spent in acquiring. It seems that there were too many acquisitions that made the ratio dropped. Whereas, acquisitions can be considered as long investment, it will make more profit in the future for Cadbury Schweppes. For instance, the Mantecol which Cadbury Schweppes merged 2001 had made profit for it in Argentina. It could be proved furthermore by return on capital employed ratio which shows how much can shareholders get back from their investment. The higher percentage of 11.1 tells that there were more money rewards from investment because of the right acquisitions. From cash flow statement for 2001 interim result, which shows the free cash flow was £11million more, it seems that Cadbury Schweppes managed cash more carefully than 2000. In fact, the £11million more free cash was mostly from financing which was £262million, new cash inflow from financing and decrease in cash. The statement shows the increase on group operating profit, which was from £278miilion to £338million, while the higher group operating profit led to £38million more interest paid, that means there was only £22millon more profit made in balance. Cadbury Schweppes spent a large amount of £188 million on acquisition in 2001but none in 2000. ...read more.

Conclusion

In the future, Cadbury Schweppes will invest on many new markets in Asia, India and Middle East. It is also going to open new markets by promoting different types of products in old markets, such as: develop confectionery in North America and promote beverages in Europe. In addition, Cadbury Schweppes is going to invest in other types of businesses, such as: sugar, chewing gum. Furthermore, buying shares of famous companies to make extra profit is the other purpose for Cadbury Schweppes in the future. SWOT analyses Strengths 1. Long history up to 200 years 2. Cadbury and Schweppes have been awarded Royalty. 3. The third largest beverage company in the world 4. The fourth largest confectionary companies in the world 5. Products are sold over 200 countries. 6. Profits are increasing year by year. Weakness 1. Very few new products are created by own group. 2. Small range of products. Opportunities 1. Expand into new markets 2. Produce new products 3. Try different types of businesses. Threat 1. Coca-cola. 2. Nestle. 3. Supermarket own brands Conclusion To sum up, Cadbury Schweppes has only 33 years history for its new life with strong market networks and wealthy assets that gained by both Cadbury an Schweppes. This forceful background enables it to have much more free cash flow to acquire other strong brands in order to fresh its markets, which is the main strategy Cadbury Schweppes takes for making profits. It is seems that this company is rely on acquisitions too much. It will be much cheaper if they create new products by itself. Cadbury Schweppes operates under a decentralisation and flat structure, which gives lower level manager power to make decisions. In order to reduce length of decisions making cycle, the top leaders delegates more power to lower directors in different markets. In the future, this company will expand into larger range of products, which has begun with chewing gum and sugar, new markets, in particular, Asia and Africa. ...read more.

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