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A New Future for Cadbury Schweppes

Separating the candy and drinks divisions is supposed to allow them to sharpen their focus on rivals such as Coke and Wrigley, but big challenges await

The moment was almost a year in the making. On Apr. 11, shareholders of Cadbury Schweppes (CSG), the world's largest candymaker and one of the top sellers of beverages, finally voted to spin off the company's U.S. drinks division. Separating candy from drinks theoretically will boost shareholder value and allow the two halves of the company to sharpen their competitive focus on rivals such as Coca-Cola (KO), Pepsi (PEP), Nestlé (NESN.BE), Hershey's (HSY), and Mars.

But despite an upbeat tone set by Chief Executive Todd Stitzer, both new companies face big challenges. Lacking the diversified product ranges of its competitors, the newly independent chocolate, candy, and gum business—to be listed on the London Stock Exchange on May 2—could become a takeover target (BusinessWeek.com, 10/19/07) for a deep-pocketed rival such as Kraft Foods (KFT). Some British shareholders worry about another iconic brand falling into foreign hands.