Cadbury Schweppes plc is the world's largest confectionery company and has a strong presence in beverages in the Americas and Australia. Their confectionery business is organized into four business segments and is geographically divided into four regions: Britain Ireland Middle East and Africa (BIMA), Europe, Americas and Asia Pacific. Concentrating on their core brands in beverages and confectionery since the 1980's, they have strengthened their portfolio through almost fifty acquisitions, including brand icons such as Mott's, Canada Dry, Halls, Dr Pepper and 7 Up.
We will be conducting a credit rating analysis of the company in the coming sections by looking at the industry trends and competition, followed by some traditional ratio analysis. In the end, we will compare our analysis with ones conducted by major credit rating firms. Competition and Industry Trends: The confectionery industry is highly competitive and is growing at a rapid pace. The main drivers are population growth and increased consumer wealth (particularly in developing markets), and product innovation, affecting both developed and developing markets.
According to Euromonitor, the global confectionery market grew in value by 5% in 2005. Overall, developing markets are growing faster than the developed ones. As far as Cadbury Schweppes is concerned, it competes with companies such as Mars and Nestle and with many other multi-national, national and regional companies in various markets. The following table indicates the position of the company when compared to its competitors:
Cadbury Schweppes recently increased their annual revenue goal from 3-5% to 4-6%, reflecting the higher growth prospects of the confectionery business. The global confectionery business has been around 5% for the last 5 years, which means that the company is abreast with the market trends. Financial Analysis: Having achieved an understanding of the company's position in the industry, we need to proceed with a financial analysis.
The financial analysis will consist of the following metrics: Based on the fact that the ratings assigned to Cadbury Schweppes by major rating agencies is similar to what we have estimated it to be, we are confident that the company has a "BBB" rating. This means that Cadbury Schweppes plc has GOOD financial security characteristics, but is more likely to be affected by adverse business conditions than are higher rated insurers.