The ultimate aim of any business is survival. At least five groups want to see a company not only survive but flourish: its shareholders, directors, employees, suppliers and customers. In certain industries, being big may be necessary for survival but may not guarantee it.
In the 1980s and 1990s Cadbury Schweppes wanted to secure its future through growth. Growth took two main forms: increasing the scale of the company’s existing output and diversifying its product range.
- By increasing output in its core businesses, it looked to achieve economies of scale that would help it compete in world markets.
- By broadening its product range, the company spread its risks and made itself less vulnerable to downturns in any particular area of its business.
This approach transformed Cadbury Schweppes from a mainly UK and British Commonwealth confectionery business, allied to a single strong mixer beverage brand, into an international business with significant interests in confectionery and beverages worldwide.
Having achieved this, Cadbury Schweppes plc wanted to consolidate. It realised that policies and practices that ‘get you there’ may well not be enough to ‘keep you there’. Growth through acquisition enabled the group to build up a large portfolio of well-known brands, but it became clear that not all of its products were contributing equally well to its overall profitability.
There were other considerations too. Shareholders were no longer attracted to companies simply because of their size. Aware of this, the management of Cadbury Schweppes decided that to stay attractive to shareholders it would need to amend the targets it set itself.
This case study looks at how, to try to improve its financial performance and become more attractive to shareholders, Cadbury Schweppes applied an adopted business philosophy to one of its core business activities: selling chocolate products to children either directly or through their parents.