Cadbury Schweppes Cutbacks

by The Times 100 on Wednesday 17th October, 2007

Cadbury Schweppes Cutbacks

By Guest Writer Henry Hodges (Year 13)

The well-known confectionary producer Cadbury Schweppes has recently announced a series of cutbacks including the closure of its Keynsham factory, which is located near Bristol a move expected to result in the loss of around 500 jobs (BBC, 3rd October 2007). The closure is scheduled to be complete by 2010 and is part of a scheme launched earlier this year by the company to close 15% of its manufacturing branches; involving 7,500 job losses. Such measures, it is hoped by Cadbury Schweppes, will save the company £400 million a year (The Guardian, 28th October 2007).

Why is Cadbury Schweppes facing increasing pressure to achieve efficiency gains? Perhaps the recent health food campaigns, such as the Jamie Oliver 'healthy school dinners' scheme, can partly explain the changes. As the population become more educated on the benefits of health food, demand for the less healthy alternatives provided by some products central to the sales of companies such as Cadbury Schweppes has begun to fall. This is illustrated by poor recent European sales for the firm (BBC, 18th June 2007). This shift in demand has made it necessary for firms to improve efficiency in order to reduce costs of production and avoid what would otherwise be inevitable falls in profitability. A dampening of demand has been further exaggerated by a salmonella scare, which led to the recall of one million chocolate bars in the UK (BBC, 24th June 2007).

The recent focus on healthier eating is reflected in the Times 100 case study of Nestle, a competitor of Cadbury Schweppes in the confectionary industry, and its nutritional food labelling scheme.

Sources

The Times 100 Edition 12 Nestle case study – Business principles in action – nutritional labelling

BBC News – Cadbury factories shed 700 jobs – 3rd October 2007

BBC News – Cadbury plans fuel job concerns – 18th June 2007

Cadbury's cuts 10% of global workforce – 28th October 2003

BBC News – Cadbury salmonella scare probed – 24th June 2006

Potential study questions:

a. Explain the reasons for the downturn in sales for Cadbury Schweppes.

b. How might this be illustrated diagrammatically?

c. Evaluate the strategy of rationalisation employed by Cadbury Schweppes, to ensure that profitability levels are maintained.

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