Annual Report and Accounts 2006

Regions and functions

We are organised into four regional operating units and six global functions. Each region focuses on commercial operations in its geographical and product area, and also maintains teams from each of the six functions. The four regions are: Americas Beverages; Americas Confectionery; Europe, Middle East and Africa; and Asia Pacific.

The functions are Global Supply Chain, Global Commercial, Science and Technology, Human Resources, Finance and Information Technology, and Legal and Secretariat. Responsibility for company secretarial matters has been separated from the legal function. Each function has a small central team based at Group Headquarters and regional presences coordinated by the central team.

This structure enables us to focus on delivering our commercial agenda and top-line growth, and allows the functions to develop and drive global strategies and processes towards best in class performance, while remaining closely aligned to the regions' commercial interests.

A description of the regions begins on page 26 and of the functions on page 29.

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Board of Directors and Chief Executive's Committee

The Board is responsible for our overall management and performance, and the approval of our long-term objectives and commercial strategy.

The Chief Executive's Committee (CEC), which includes the leader of each region and function, reports to the Board and is responsible for the day-to-day management of our operations and the implementation of strategy. This team is responsible to the Board for driving high level performance of our growth, efficiency and capability programmes.

The CEC develops global commercial strategy and addresses supply chain and major operating issues arising in the normal course of business. This includes reviewing the regions' and functions' performance contracts, and determining necessary action relating to financial policy, targets, results and forecasts. It approves some capital and development expenditures according to authorities delegated by the Board, reports to the Board on the Group's sources and uses of funds, cash position and capital structure, and reviews the structure and policy of Group borrowings. The CEC evaluates foreign exchange, interest rate and other risk management policies and submits an annual risk management report to the Board. It also reviews proposed acquisitions and disposals, joint ventures and partnerships before submission to the Board, and reviews and approves legal and human resources matters.

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Changes to the composition of the Board and CEC

In 2006 and early 2007 there were a number of changes to the Board and senior management of the Group. Changes to senior management were as follows:

Tamara Minick-Scokalo joined the CEC as President Global Commercial on 2 January 2007 replacing Nick Fell who left the Group in May 2006. Tamara was previously Senior-Vice President Europe at Elizabeth Arden Inc. and prior to this she was European Manager for Gallo Wines. Her commercial skills were developed at Procter & Gamble where she held a variety of roles over a career spanning 19 years.

Mark Reckitt was appointed to the CEC as Group Strategy Director on 2 January 2007. Mark has been Group Strategy Director since 2004 and in 2005 also became responsible for Mergers & Acquisitions. Mark has held a variety of roles in the Group since joining us in 1989.

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Regions

The following charts show the relative size of the Group's regions. Market share information, except where otherwise indicated, is sourced from the latest available information from IRI or Nielsen for 2006.

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Revenue by region

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Underlying profit from operations¹

1

Explanation of Underlying profit from operations and a reconciliation to profit from operations. Percentage share excludes Central. In 2006, 60% of our revenue came from confectionery and 40% from beverages. On the same basis, the Americas regions accounted for 53% of revenue, EMEA 31% and Asia Pacific 16%. Emerging markets accounted for 24% of revenue, with developed markets accounting for the remainder.

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Americas Beverages

	2006	% of Group Total2		2006	% of Group Total2
Revenue	£2,566m	35%	No of employees3	18,372	26%
Profit from operations	£562m	51%	Operating assets	£566m	27%
Underlying profit from operations1	£584m	47%	No of production assets	24
Operating margin	21.9%
Underlying operating margin	22.8%
Main markets:	US, Canada, Mexico
Main brands:	Dr Pepper, Snapple, Mott's, Hawaiian Punch, Peñafiel, Clamato, 7 UP, Yoo-Hoo, A&W, Sunkist, Diet Rite, Canada Dry, Schweppes, Nantucket Nectars

1	Explanation of Underlying profit from operations and a reconciliation to profit from operations.
2	Percentage share excludes Central.
3	No. of employees has been calculated assuming CSBG was owned for the full year.

The Americas Beverages region comprises operations in the US, Canada and Mexico. The principal products of the business are carbonated and non-carbonated soft drinks.

In carbonated soft drinks, Americas Beverages participates mainly in the flavours (non-cola) segment, where we own the number one or number two brands in most categories in which we compete. Americas Beverages has a 17.6% share of the US carbonated soft drinks market, the world's largest. Its main carbonated soft drinks brands are Dr Pepper, which has a 7.5% share of the US market - and 7 UP. We own 7 UP in the United States and Puerto Rico only. Other important brands include Canada Dry, A&W and Sunkist, which is a licensed product. Diet drinks account for approximately 25% of our carbonated soft drinks volume. In non-carbonated drinks, Americas Beverages competes in ready-to-drink teas, juice and juice drinks. Our non-carbonated beverage brands include Snapple, Hawaiian Punch, Mott's and Clamato. Through the acquisition of Dr Pepper/Seven Up Bottling Group, we acquired the Deja Blue water brand, and the distribution rights in certain territories for other brands including Glaceau vitamin enhanced waters and Monster energy drink and Fiji mineral water.

Our beverage products are distributed through a number of different routes to market. In North America, our carbonated soft drinks brands are manufactured and distributed through company-owned and third-party bottling and canning operations.

The third-party bottlers source beverage concentrate from Americas Beverages, which operates as a licensor. With the acquisition of Dr Pepper/ Seven Up Bottling Group and other US bottlers in 2006 to form Cadbury Schweppes Bottling Group (CSBG), we increased the proportion of our beverage brands manufactured and distributed through Cadbury Schweppes owned bottlers from under 20% to around 40%, and our carbonated soft drinks brands from under 5% to around one-third. Approximately 70% of Dr Pepper volumes are distributed by companies in which our competitors have a significant stake and the remainder primarily through CSBG. CSBG distributes about 45% of our other carbonated soft drinks brands and around 80% of our non-carbonated soft drinks brands. The processes and operations of the independentlyowned bottlers are monitored to ensure high product standards. We also provide marketing, technical and manufacturing support.

In Mexico - the world's second largest carbonated soft drinks market - we are the third largest beverages company, with 6% of the Mexican carbonated soft drinks market and a 17% share of the non-cola market. Our main carbonated brands in Mexico are Peñafiel, Squirt, Crush and Canada Dry. Peñafiel is the leading brand in the mineral water sector, with a 37% market share.

We manufacture and sell our products both through companyowned bottling operations and third party bottlers. Around 20% of our volume in Mexico is manufactured and distributed by third party bottlers. The balance, including the majority of our brands, is manufactured by company-owned bottling operations.

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Americas Confectionery

	2006	% of Group Total2		2006	% of Group Total2
Revenue	£1,330m	18%	No. of employees	14,568	21%
Profit from operations	£181m		Operating assets	£325m	16%
Underlying profit from operations1	£207m		No. of production assets	10
Operating margin	13.6%
Underlying operating margin	15.6%
Main markets:	US, Canada, Mexico, Brazil, Argentina, Colombia
Main brands:	Trident, Halls, Dentyne, Bubbas, Clorets, Chiclets, Cadbury, Swedish Fish, Sour Patch Kids, Beldent, Bazooka, Mantecol, Stride

1	Explanation of Underlying profit from operations and a reconciliation to profit from operations.

Americas Confectionery operates businesses in all the region's major countries, including the US, Canada, Mexico, Brazil, Argentina and Colombia. Approximately 55% of sales are in the US and Canada, with the remainder in Mexico and Latin America.

In the US, the world's largest confectionery market, we have the second largest market share in gum at 32%, mainly through the Trident and Dentyne brands, and the leading share at 53% in cough/cold confectionery through Halls. In 2006, we launched a new gum brand in the US, Stride, which now has a 2.9% share of the US gum market. We are also the largest confectionery company in Canada, the world's 11th largest confectionery market, with an overall 24% market share and leading market positions in gum, candy and cough confectionery, and a top three position in chocolate. Five brands, Trident, Dentyne, Cadbury Dairy Milk, Caramilk and Mr. Big, account for around 50% of Canada's sales.

In Latin America, we have the leading overall confectionery market share at 17%, (Source: Euromonitor 2005), more than double that of our nearest competitor. We have a 63% share (Source: Euromonitor 2005) of the Latin American gum market, and leading market shares in gum in Mexico, Brazil, Venezuela, Argentina and Colombia. We also have the leading share of the fragmented candy confectionery market at 8% (Source: Euromonitor 2005). We have a broadreaching distribution infrastructure in Latin America which enables us to supply a highly fragmented customer base of small shops and kiosks. In Mexico, we have a 78% share of the gum market and 85% of the candy market. Other brands sold in the Americas include Clorets, Swedish Fish, Sour Patch Kids, Beldent, Bazooka and Mantecol. We have manufacturing facilities in Canada, the US, Mexico, Argentina, Brazil and Colombia.

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Europe, Middle East and Africa (EMEA)

	2006	% of Group Total2		2006	% of Group Total2
Revenue	£2,318m	31%	No of employees	23,457	34%
Profit from operations	£205m	19%	Operating assets	£828m	40%
Underlying profit from operations1	£276m	23%	No of production assets	35
Operating margin	8.9%
Underlying operating margin	11.9%
Main markets:	UK, France, Poland, Spain, Russia, Turkey, Greece, Egypt, South Africa, Nigeria, Scandinavia
Main brands:	Cadbury, Hollywood, Halls, Wedel, Bassett's, Trident, Dirol, Stimorol, Kent, Poulain, Trebor, Maynards, Green & Black's, Bim Bim, Chiclets, TomTom, Bournvita

1	Explanation of Underlying profit from operations and a reconciliation to profit from operations.
2	Percentage share excludes Central.

The EMEA region includes all of our confectionery businesses in Europe (including Russia), Africa and the Middle East.

The UK is our largest confectionery market in EMEA. We have a leading 31% share in the UK, the world's second largest confectionery market. We sell chocolate and candy products, under brand names including Cadbury, Trebor, Bassett's, Maynards, Green & Black's and Halls. In January 2007, we launched Trident gum in the UK.

In Continental Europe, where our main markets are France, Iberia and Poland, we primarily sell gum and candy. France is our largest operating unit and we have the leading position in the French confectionery market - the world's sixth largest - with a 16% share. We have a 48% share of the French gum market, principally under the Hollywood brand. We also sell candy under the La Pie Qui Chante and Carambar brands, and chocolate, mainly under the Poulain brand. We sell gum under the Trident brand in Spain, Portugal and Greece and Stimorol and V6 in Denmark, Belgium and Sweden. Our candy brands include Halls in Spain and Greece. We sell chocolate under the Wedel and Cadbury brands in Poland, where we have a 15% market share, and also operate in the Netherlands and Switzerland.

Outside Continental Europe, our main businesses in the EMEA region are Russia, Turkey, Egypt, South Africa and Nigeria. In Russia, we have a 27% share of the gum market through the Dirol brand, and we also sell medicated candy under the Halls brand and chocolate under the Cadbury brand. We have the leading share of Turkey's candy market at 59%, with brands including Kent, Missbon, Olips and Jelibon, and a top three position in gum. We also sell chocolate under the Grand Chocolates and Bonibon brands.

In Africa and the Middle East, our main confectionery operations are in Egypt, South Africa, and Nigeria where we have number one market shares. We are the leading confectionery company in Africa. On 20 February 2006, we announced that we had increased our shareholding in Cadbury Nigeria to 50.02%.

In South Africa we are the number one confectionery company with a share of 35% (Source: Euromonitor 2005). We sell confectionery products under the Cadbury and Halls brands and have a 41% chocolate share. Following the acquisition of the Dan Products business in June 2006, we have a leading share of the South African gum market at 60%. Our Nigerian business sells candy, food beverages and bubble gum. Its lead brands include Tom Tom, the biggest selling candy in Africa, Bournvita, and Bubba bubble gum. In Egypt, we sell products under the Cadbury, Bim Bim and Chiclets brand names and have a 41% share of the confectionery market. We also operate in Morocco, Lebanon, Ghana and Kenya.

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Asia Pacific

	2006	% of Group Total2		2006	% of Group Total2
Revenue	£1,205m	16%	No. of employees	13,354	19%
Profit from operations	£142m	13%	Operating assets	£354m	17%
Underlying profit from operations1	£165m	13%	No. of production assets	25
Operating margin	11.8%
Underlying operating margin	13.7%
Main markets:	Australia, New Zealand, India, Japan, Thailand, China, Malaysia, Indonesia, Singapore
Main confectionery brands:	Cadbury, Halls, Trident, Clorets, Bournvita
Main beverage and food brands:	Schweppes, Cottee's (Australia only)

1	Explanation of Underlying profit from operations and a reconciliation to profit from operations.
2	Percentage share excludes Central.

The Asia Pacific region comprises our confectionery operations in Australia, New Zealand, India, Japan, Malaysia, Indonesia, Thailand and China, and Schweppes Cottee's, an Australian beverages and foods business. In 2006, we also entered the Vietnamese market through a third-party distribution agreement.

Australia and New Zealand are our largest markets in the region. Australia is the 12th largest confectionery market in the world. We are the leading company in the Australian confectionery market, and have the number one position in chocolate with a 53% market share, and a strong presence in candy. Our main chocolate brand in Australia is Cadbury. Our Australian beverages business's products are sold under the Schweppes, Cottee's, Solo, Spring Valley, Sunkist and Wave brand names. Schweppes Cottee's also has a licence to manufacture, sell and distribute Pepsi, Red Bull, 7 UP, Mountain Dew and Gatorade. In Australia, we both manufacture, distribute and market our own products and manufacture concentrate and bottle product for other manufacturers. In New Zealand, our brands include Cadbury and Moro, and we have a number one position in the confectionery market with a 46% share.

Other significant markets in this region include India, Japan and Thailand. Our Indian business has a leading presence in chocolate with a 72% market share, and also sells candy under the Eclairs and Halls brands and food beverages under the Bournvita brand. Our Japanese business sells mainly gum under the Recaldent and Clorets brands, and has a number two position in gum with a 18% market share.

We also have leading market shares in Thailand in gum and candy at 62% and 32% respectively. In Malaysia, we have a number one market share in chocolate at 26%, and in gum, through the Dentyne brand, we have a 17% share.

We have manufacturing facilities in Australia, New Zealand, India, Japan, South Africa, Malaysia, Pakistan, Thailand, China and Singapore.

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