Salmonella recall cost Cadbury £20 million

09-08-2006

Confectionary firm Cadbury Schweppes has said that it expects the recent salmonella scare at one of its production plants to cost the company around £20 million this year.

The maker of the popular Dairy Milk chocolate brand said sales had fallen by £5 million after it was forced to recall one million chocolate bars when a pipe caused salmonella contamination at its Marlbrook factory in Herefordshire.

About half of the £20 million cost of the damage relates to the expense of the product withdrawal, which took place in June, while advertising costs and "manufacturing improvements" accounted for the rest.

Cadbury hopes that its insurance will cover £6 million of the sum.

Several consumers have indicated that they are considering taking legal action against the company after contracting salmonella poisoning as a result of the incident, with the Food Standards Agency (FSA) finding Cadbury guilty of using outdated methods of risk assessment in relation to the prevention of salmonella contamination.

But despite the setback, the company has also announced a 20 per cent rise in pre-tax profits for the first half of the year.

Underlying pre-tax profits in the six months to June 30th were £402 million, Cadbury said in a trading statement.

Cadbury chief executive Todd Stitzer said that the company expected to report strong growth across the year, but was still monitoring the impact of the salmonella recall.

"We expect to deliver revenue growth towards the upper end of our goal range for the full year but are still monitoring the trading impact of the UK product recall," he said.

Mr Stitzer added that "exciting new innovation" was helping to drive growth within both the company's confectionary business and across its beverages arm.


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