Cadbury owner intends to save even more

Cadbury, which employs around 800 people at a sweet-making plant in Sheffield, accounted for 90 per cent of the 25 per cent rise in Kraft's net revenues to $12.3bn (7.75bn) during the second quarter of 2010.

This increase boosted earnings by 13 per cent to $937m (590.1m).

The US food company, which is best known for brands such as Maxwell House coffee and Oreo cookies, said net revenues from Kraft Foods declined 1.9 per cent in North America due to weak consumer conditions and aggressive promotional activity by rivals.

Cadbury – the owner of brands including Dairy Milk, Halls and Green & Black's – saw revenues growth in the region of 7.5 per cent over the same period after successful new product launches for gum brands Trident and Dentyne.

Kraft's revenues increased by 34 per cent in Europe, of which 31.8 per cent came from the Cadbury acquisition.

Cadbury's own performance was flat in the quarter as solid growth in Britain and France was offset by weak conditions in southern Europe, particularly Spain and Greece, as well as the impact of an early Easter.

Kraft, which bought Cadbury in a controversial 11.5bn takeover in February, said it was making "excellent progress" on the Cadbury integration.

Total cost synergies from the Cadbury deal are now likely to be at least $750m (472.3m), up from $675m (425.1m). The company did not provide further details.

On the results, chief executive Irene Rosenfeld said: "We delivered strong earnings in the quarter and the first half of the year, despite difficult conditions in many markets that tempered top-line growth."

Kraft plans to invest the cash from the better-than-expected profits and cost savings into its brands.

This investment will take the form of increased advertising and marketing as well as promotions.

Ms Rosenfeld said: "We're just not going to continue to tolerate (market) share losses due to aggressive promotional activity (by rivals)."

Ms Rosenfeld called Kraft's second-quarter revenue performance "mixed," highlighting "softness" in the US where rivals' promotions on products like cheese, biscuits and salad dressing affected Kraft's sales.

However, those discounts have not succeeded in fuelling store traffic or category sales growth, and they could decrease in the second half of the year, Ms Rosenfeld said.

"It's quite possible that this could be the beginning of an inflection," Ms Rosenfeld said while taking part in a conference call with analysts.

She said her view was based on "evidence that would suggest that is not the right way to run the business for long-term health".

However, Ms Rosenfeld said Kraft would discount certain products in those categories to protect market share.

Kraft also revealed that some distributors of Cadbury products plan to sell through large inventories they had built up before the

acquisition, a plan that could slow the segment's sales.

As a result, Kraft trimmed its full-year revenue growth forecast to a range of three per cent to four per cent, from an earlier forecast of at least four per cent.

Independence ended in takeover

Cadbury's 186-year independent history ended when it was taken over by Kraft in an 11.5bn deal in February.

After the announcement, unions demanded meetings with Kraft to try and gain assurances about the fate of Cadbury's workers.

The then-Prime Minister Gordon Brown also weighed in and said the Government was "determined... jobs in Cadbury can be safe".

At the time of the takeover, Cadbury employed around 45,000 people in 60 countries.

It has around 5,600 staff at eight manufacturing sites in the UK and Ireland, including 800 at its Bassett's Liquorice Allsorts plant in Sheffield.

Kraft chief executive Irene Rosenfeld said the takeover represented a compelling opportunity for both companies' shareholders.

Kraft bought chocolate company Terry's in 1993 and closed its York factory in 2005 with the loss of 316 jobs.