Cadbury unfazed by cocoa fall

Cadbury Schweppes plc and Nestle SA, two of the world s biggest chocolate makers, have shrugged off renewed volatility in cocoa prices after the commodity
fell to a six-month low. Cocoa prices this week fell to their lowest levels since July because the key chocolate ingredient was cut from a major commodities index. Traders attributed the price fall to a sell-off of cocoa futures contracts in London and New York by index-tracking funds. Companies such as Cadbury Schweppes try to protect their cocoa exposure by taking out futures contracts. However, the contracts leave them exposed to prolonged upward as well as downward price trends. An analyst with a big US investment bank said: "I think that if cocoa prices were to stay at very low levels for six months, we would probably review our margins for Cadbury Schweppes and Nestle." A Cadbury Schweppes spokesman said: "Like all major cocoa users, we protect ourselves by buying into the forward markets, which gives us certainty on supply and price." Cadbury Schweppes, which derives about 35 per cent of group profits from confectionery, sources its cocoa from Ghana, but would not disclose how many tonnes it buys each year. Nestle buys more than 350,000 tonnes of cocoa beans a year.