Cadbury set to shed 15% of workforce

Confectionery and drinks giant Cadbury Schweppes has announced plans to cut 15% of its staff by the year 2011.

The UK firm said that 7,500 staff would be made redundant as part of a cost reduction plan that would also see about 15% of its manufacturing sites close.

Cadbury, which employs 50,000 staff globally, has yet to say whether any of its UK plants will be affected.

The firm’s headquarters are in London, while its main chocolate-making factory is based in historic Bournville, Birmingham.

BBC Business Editor Robert Peston said the Bournville site was likely to be largely unaffected.

Cadbury has another chocolate plant in Keynsham, near Bristol, and a cocoa processing operation in North Wales.

It also has a milk-processing facility in Herefordshire, a sugar factory in Sheffield and a medicinal confectionery business in Crediton, Devon.

Cadbury’s shares had fallen 1.3% to 697 pence by early afternoon trading in London.

The reorganisation will cost Cadbury approximatley £450m in a one-off charge.

But it said that as a result, its profit margins should increase from 10.1% to the mid-teens by 2011.

The Transport & General Workers’ Union, which represents more than 2,000 of Cadbury’s UK workforce, said the news of job cuts was a “grave concern”.

“Cadbury’s is an iconic British brand which is a good and successful company that is clearly profitable,” said Brian Revell, the T&G’s national secretary for food and agriculture.

“We have worked hard with Cadbury in recent years and co-operated in a change programme which means the UK factories are extremely efficient.

“We are, therefore, concerned by today’s announcement which we are convinced is driven by the threat of a takeover by private equity.”

Cadbury added that it would probably now sell off its drinks business, as part of plans to split the company in two.

The company said unnamed parties had expressed an interest in buying the Schweppes unit, which produces drinks such as Dr Pepper and 7-Up.

This sale could raise more than £7bn, and the interested parties are said to be private equity groups.

US newspapers say two private equity consortia are looking at Schweppes, with the first comprising Bain Capital Partners, Thomas H Lee Partners and Texas Pacific Group.

The second is said to be Blackstone Group, Kohlberg Kravis Roberts and Lion Capital.

Others say Schweppes could see a third offer by a group led by Canadian drinks-maker Cott.

Following the expected sale, Cadbury said it would simply remove the Schweppes part of its name.

The firm has been under pressure after bad European sales and a costly salmonella scare here in the UK.