Description of Business

Functions

Global Supply Chain

The role of Global Supply Chain (GSC) is to ensure the supply of product to satisfy our customers' expectations whether manufactured by us or by a third party. GSC's role encompasses the supply of raw and packaging materials, and planning, manufacturing, distribution and customer services. GSC is responsible for managing both the fixed assets of over 100 manufacturing facilities and over 250 warehouses, and working capital.

GSC's structure enables shared accountability at the regional level for results and strategy execution day-to-day, while ensuring that cross-regional and step-change supply opportunities are pursued at the functional level. The function is led centrally by the President, GSC, and regionally by the four regional heads of supply chain. Key functional activities are managed centrally and operate on a global basis. They are focused on Strategy and Process Improvement; Best Practice Implementation; Quality, Environment, Health and Safety management (QEHS); Global Procurement; and Ethical Sourcing.

In 2005, as part of the Fuel for Growth programme, GSC's cost saving agenda included procurement savings in raw materials, packaging and non-production spend, as well as factory efficiency and reconfiguration.

Other efficiency initiatives in 2005 included implementation of a five step Sales and Operations Planning (S&OP) process, and the formation of a global Logistics and Customer Operations (L&CO) leadership team. S&OP, which has now been implemented in 90% of our businesses, aims to reduce service level interruptions and inventory levels, and enhance the efficiency of product launches. The L&CO leadership team will identify opportunities to improve our distribution and warehouse costs and processes.

In 2005, GSC implemented a number of processes to ensure that we have a standardised approach to quality. Over 90% of our sites are now using Hazard Analysis and Critical Control Point (HACCP) processes to identify and address key areas of risk in relation to quality. Also in 2005, the Quality Management System began tracking the implementation of the Global Cadbury Schweppes Quality Standards.

A Group-wide approach to supplier quality was implemented through a standardised Supplier Quality Management Process and a global database holding supplier details. Our ethical sourcing initiatives aim to help protect, sustain and enhance our brand reputation. We have so far had discussions on this topic with over 90% of our most important suppliers. Our Ethical Sourcing Standards (ESS) have been incorporated as an integral element into all purchase orders, contracts and pre-qualification documents, and over 200 employees in procurement have received ESS training.

GSC continued to progress environmental initiatives in 2005, supporting the achievement of a 4% improvement in environmental Key Performance Indicators or KPIs by 2008.

GSC continues to seek improvements to its health and safety performance: in 2005 it initiated Group-wide environmental, health and safety (EHS) standards, management systems and specific safety training programmes, and implemented a global EHS data collection system. In 2006, we will start to focus on Behavioural-Based Safety and Driver Safety programmes.

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Global Commercial

The role of Global Commercial (GC) is to enable higher sales growth from the regions and business units than they could otherwise generate on a stand-alone basis. GC has a central and regional structure, with a central team managing teams drawn from all parts of the Group. Its activities focus on:

• creating a winning strategy for each category in which we participate
• creating global solutions for markets to win locally
• creating a pipeline of innovation
• coordinating the management of key international customers
• creating world-class commercial capabilities

In 2005, we completed our consumer segmentation study in 38 key markets. This study provides a common and aligned segmentation of markets based on over 80,000 consumer interviews as a foundation for superior insights into consumer behaviour.

Our Building Commercial Capabilities programme has been created on the foundation of the consumer segmentation programme. Over 1000 sales and marketing leaders were trained in 2005, and a further 1500 employees will be trained in 2006. The programme is designed to give us an integrated sales and marketing process, with a single commercial language and common tools and processes for developing commercial programmes.

The consumer segmentation programme and development of a consistent research methodology have also helped increase our success in developing winning ideas to populate our innovation pipeline. This, along with adoption of a proprietary software tool for project management and a common process for innovation decision-making and resource-allocation, has dramatically increased our innovation capability. In 2005, we continued to progress towards our overall innovation goal, delivering 10% revenue innovation, driven by the successful introduction of a number of new differentiated products. These included in Americas Beverages, Dr Pepper Cherry Vanilla, 7 UP Plus and Mott's Plus; in Americas Confectionery, Trident Splash, Trident Fusion, Dentyne Soft Chew and innovations in the Halls sugar confectionery range, such as Halls Max; and in the EMEA region, Cadbury Snaps and Trident Splash. We have a strong innovation pipeline for 2006.

GC has also identified certain key international customers whose commercial agenda can be supported by an international approach and who can help drive our growth agenda. A Global Sales Team and an International Customer Leadership Team have established value added relationships with these customers.

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Science and Technology

Science and Technology (S&T) leads our technical innovation programme. S&T sets and communicates our global technical priorities, establishes and co-ordinates our science agenda, and facilitates global knowledge management and best-practice transfer. It prioritises (with the regional teams) and funds technology developments which underpin our innovation agenda, including longer-term globally-applicable development programmes. It co-ordinates nutrition initiatives as a key element of our food policy. Together with Group Legal, it also creates a strategy for our intellectual property assets.

The function is led by a Chief Science and Technology Officer, supported by Science and Technology heads in each region and heads of the Global Science Centre, of Scientific Affairs, and of Process Technology. The S&T teams in each of our business regions have primary responsibility for developing and executing the innovation programmes. This includes prioritising and resourcing all regionally-driven product packaging and process development activities.

We use our own S&T facilities as well as those of suppliers. Our major Science and Technology facilities are at Reading, UK; Hanover Park, New Jersey, USA; and Trumbull, Connecticut, USA. The Reading facility provides science and technology support to the Group both globally and to the EMEA region and also supplies third parties as an External Science Business. Hanover Park serves Americas Confectionery. Trumbull serves the Americas Beverages region. We also have several smaller facilities around the world which support local business units, such as those at Bournville, UK; in South Africa; in Paris, France; in Melbourne, Australia; and in India.

We upgraded our S&T assets in 2005 with a new 120,000 square foot facility including pilot plant capabilities, completed at Hanover, New Jersey in November 2005 at a cost of $40 million. We also began building a new facility in Singapore for the Asia Pacific region, to focus on chewing gum and other confectionery, and made improvements at existing sites such as Trumbull and Reading.

In 2005, we strengthened S&T's global agenda by establishing a Global Science Centre at Reading and a Centre of Excellence for Global Gum Technology at Hanover Park. Our Global Science Centre's research team agenda is organised around three broad technology platforms: ingredients and taste; process and product forms; and nutritional science. The role of the Global Gum Technology centre is to provide technical leadership and support for the gum business globally. In addition, we signed a multi-year technical collaboration agreement with Senomyx to develop unique and proprietary flavour platforms for gum globally.

We made a number of key appointments to strengthen our global and regional capabilities in 2005, including a Managing Director and a Senior Research Director at the Reading facility, a Director of the EMEA region, a Global Process Technology Director and a People Capability Director. Overall headcount was over 600 at the end of 2005.

In 2005 we developed and approved Global Food Position Papers which are now being cascaded down the organisation. We developed, agreed and distributed global labelling standards across the Group, and implemented them in all major markets. We formed an External Nutrition Advisory Board in the US which is expected to operate globally from the second quarter of 2006.

We began a review of our intellectual property assets in 2005. Our rate of new filings also increased with the development of our innovation agenda with over 30 filings relating to gum and sugar confectionery alone in 2005.

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Human Resources

The role of Human Resources (HR) is to improve our performance by enhancing the effectiveness of our day-to-day working practices, the capability of our people and the quality of their output. It is also responsible for ensuring that the working environment at Cadbury Schweppes reflects our core purpose and values, and enhances our culture. HR supports the business in delivering its goals by putting in place the right people for the right job; by helping develop and support the most effective organisational strategies and structures; and by attracting, retaining and developing employees and rewarding the right behaviours and outcomes.

The HR function is organised to ensure delivery of our people strategy. The HR leadership team combines regional HR generalist business partners and central worldwide functional experts. The team leads the development of best practice, the coordination and ownership of global processes and the strategy for service delivery. In the central team are heads of specific areas including remuneration and benefits, organisational effectiveness, resourcing and talent development. The regional HR directors are responsible for employee and organisational strategies for their region, and the management of resources to deliver maximum benefit. All the HR processes are supported by a set of minimum standards which are binding on all regions and business units.

Corporate Communication and External Affairs also report to the Chief Human Resources Officer, and are therefore within the HR organisation. The purpose of these two departments is to protect and promote our reputation for being values-led, consumer-informed and commercially astute. Organised on the same principle of regional generalist leaders and central specialist experts, the departments have global accountability for internal communication and change management communication; driving the CSR strategy within the business; public relations (including corporate, financial and brand public relations); issue and incident management and communication; our corporate websites; and UK, European Union and US public affairs.

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Finance

The role of Finance is focused on a strong business partnership with the commercial operators of the Group, while maintaining a robust financial control environment. The function sets low cost, IT-enabled common internal processes and standards for financial reporting and control, and ensures high quality external reporting which complies with all applicable laws and regulations. It is responsible for setting our annual contracts (or budgets), for developing our longer-term strategy and strategy platforms and for managing acquisitions and disposals. It seeks to act as a business partner and commercial adviser to the regions and other functions in achieving our goals and priorities. It is also responsible for external financial and other regulatory reporting and for managing our communications and relationship with the investment community around the world.

The Finance function is led by the Chief Financial Officer. It comprises a central team, and units in each of the regions and business units. The central team comprises a number of specialist groups which manage their respective areas on a Group-wide basis, including financial control, financial planning & analysis, tax, treasury, strategy (including mergers & acquisitions), risk management, investor relations and IT.

Key recent priorities have included the implementation of new regulations and accounting standards, preparation for the implementation of additional Sarbanes Oxley requirements, major upgrades to our information systems, and the development of more rigorous capital allocation decision rules.

In 2004 and 2005, we continued to strengthen our finance processes, systems and reporting metrics. We installed major new information systems in many of our major business units including Dr Pepper/Seven Up, Cadbury Trebor Bassett and in our confectionery businesses throughout the Americas region. In addition, we embedded new working capital and budgeting performance indicators into our management reporting.

In mid-2004, we created a shared business service environment in Dallas (the regional head office of Americas Beverages) to provide back-office services for our beverages and confectionery operations across North America. In 2005, this improved the effectiveness of processes and reduced back-office costs.

We also remain focused on the use of capital within Cadbury Schweppes, ensuring the prioritisation of our capital resources as well as the freeing up of underperforming capital. This can be seen in our management of working capital in 2005 and our disposal of non-core businesses, brands and surplus properties.

Following the appointment of a new Chief Information Officer, we have significantly reorganised the IT function. IT is now a global organisation, and has been changed from a geographically-led to a functionally-led structure.

In 2006, Finance's emphasis will remain on its role in providing strong business partnership to drive the delivery of the Group's targets. This will be supported by a financial training programme designed to underpin our Building Commercial Capabilities programme. We will also continue to prepare for reporting on our compliance with Section 404 of the Sarbanes Oxley internal control requirements in early 2007.

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Legal and Secretariat

Legal and Secretariat work with and support the regions and other functions by taking responsibility for a broad range of legal activities. These include corporate governance matters; compliance with US and UK securities regulation and legislation; intellectual property; mergers and acquisitions; litigation management; general contract work and incident management.

In each region, a team headed by a regional general counsel works as a proactive business partner to achieve our commercial objectives in a legal and ethical way. The general counsels report both to the regional managing director or president and to our Chief Legal Officer, who has a small central team to provide support on general corporate matters. These teams work closely with the businesses, structuring, drafting and negotiating contracts with suppliers and customers, and advising management on matters such as food law, competition law, health and safety, and environmental issues. In the event of litigation, our legal teams work both to bring it to a satisfactory conclusion and, with management, on compliance activities designed to minimise the risk of further legal actions being brought against us.

Since July 2005, responsibility for company secretarial matters has been separated from the legal function. We now have a dedicated Group Secretary who, together with a centralised Group Secretariat department, is responsible for ensuring that each of our companies complies with all relevant corporate governance legislation and regulation. The department also supports the Board and Committees of Cadbury Schweppes plc, manages the relationship with our share registrar and ADR depository, and ensures compliance with UK and US requirements related to the listing of the Company's shares on the London and New York Stock Exchanges.

The Intellectual Property department is part of the Legal and Secretariat function. As described above, it works with the Science & Technology function to manage our intellectual property portfolio, including defending our rights against threats or infringements.

We own a large number of registered trade marks, copyrights, patents, designs and domain names throughout the world.We also possess many licences, along with substantial know-how, trade secrets and technology relating to our products and the processes for their production, packaging and marketing, and the design and operation of processes and equipment used in our businesses. £3.2 billion has been included in the Group's balance sheet at 1 January 2006 to reflect the cost of intellectual property acquired since 1985. For further information on our policy regarding the amortisation of the cost of brands see Note 1 to the Financial Statements.

Senior management in the Legal and Secretariat function communicate on a regular basis to ensure a consistent and proactive approach to legal matters and to further enhance the support offered to the business. When necessary, external legal support and advice is provided by leading law firms. In 2005 key legal achievements included preparation for the disposal of the Europe Beverages business, responding to changes in UK corporate governance requirements, increasing protection of our patents and strengthening resources in developing markets in the Asia Pacific region, and in the Americas, handling the contractual and leasing arrangements for key new properties for Americas Confectionery, and working with the business to strengthen the route to market for Americas Beverages.