The world's largest confectionery company has been having a rough ride over here. Since the beginning of July year-on-year profits in the UK were 5% lower than expected and sales in the Q3 were sluggish.

Four week figures from ACNielsen also showed that last month Cadbury Trebor Bassett, Cadbury Schweppes' UK business, had ceded the top spot in UK chocolate confectionery to Mars-

owning rival Masterfoods.

This was after an already difficult first six months, with sales down 2% following an inventory clearance and, of course, the salmonella product recall. Yet if CEO Todd Stitzer was concerned about facing analysts and investors in London this week, he didn't show it. Yes, there had been problems, but the future was bright, he said.

"There has been a great series of comments about our chocolate market share and the market in general," he says. "The market has been weaker, but it is starting to come back. Our share was dented in the third quarter but is still ahead year-on-year on a chocolate and total confectionery basis. It is our job to drive the market through innovation and execution. Unfortunately for most of the third quarter we were fighting fire instead of selling chocolate."

On a global scale, too, Cadbury's performance this year has been mixed. It forecasts a mid-range sales growth of 4% for 2006 but at the same time has abandoned the targets for margin growth it had set out in its 2003 Fuel for Growth programme. It blamed this on rising costs of raw materials, including oil, corn, fructose and aluminium - primarily used for its beverage arms in North America - that it said had added £150m to costs in the past three years.

Many of these spiralling costs will have had little effect on the UK operations, which have been fully focused on confectionery since the beverage side of the business was sold to Coca-Cola in 1999.

However, some analysts regard the company's reliance on confectionery as a major weakness in the ongoing obsession with obesity. Its main rivals Masterfoods and Nestlé have wider portfolios, with products ranging from coffee to petfood, so if the confectionery market falters, they can fall back relatively softly. Cadbury on the other hand has to take a hit.

Charlie Mills, analyst at Credit Suisse, says: "Cadbury is not in a strong position in UK confectionery. The company keeps saying its market share for the year to date is up. In the third quarter it is down and not showing any signs of recovery. The fourth quarter will see a load of new products and launches that will go after the share it has lost, but there is no evidence that its share has risen so far."

Stitzer shrugs off any notion that there are stormy waters ahead in confectionery, saying that although the market in the UK is down 2% in value year-on-year, the global confectionery market has recorded annual growth of 5% since 2001. "Since 2003 there has been the most furious banging of the drum on the health and obesity front [yet] the global confectionery market is growing by 4-5%. When the weather changes and we are back in the swing of things, the market will be fine."

Stitzer has a right not to be too unduly concerned. Sales of the Dairy Milk brand actually rose 3% in the UK in the past year, says ACNielsen [52 w/e 12 August 2006].

And while some rival brands are increasing sales at a faster pace, its rivals are also having a mixed time of it. Masterfoods has had success with its Galaxy brand, which grew 11% over the past year, and Mars, which rose 6%, but both Maltesers and Celebrations have suffered losses, down 9% and 6% respectively. Nestlé Rowntree's flagship Kit Kat brand, meanwhile, has fallen 14% in value for the same period.

Cadbury's innovation in chocolate confectionery in the latter part of the year, which includes Roses Luxury, Dairy Milk Melts and Flake Dark, as well as the revamped Snaps brand, also indicate that it is up for the fight. Next year it is relaunching its Bournville brand to take advantage of the hype surrounding the health benefits of cocoa-rich chocolate and is developing a premium version of Dairy Milk called Double Chocolate.

Its move into the UK chewing gum market next year with its Trident brand (see left) is also likely to reap rewards, with analysts and the industry confident of its success. Richard Brittle, purchasing director at confectionery wholesaler Hancocks, says: "Trident is a good move for the market. If Cadbury is going to do what it says it will do, it will grow the gum market. Trident is big in Europe. There is no reason why it won't be big in the UK too."

Mills adds: "In the States Trident has gone head-to-head with Wrigley for a while and Cadbury has proved it can give as good as it gets. I expect decent inroads."

The vital fourth quarter will provide a more definitive indication of Cadbury's recovery. The industry is gum battle

With Trident gum, Cadbury has opened up a new front, going head-to-head with Wrigley for the first time in the UK in a category that experienced little growth over the past year.

Wrigley has about a 98% share of the UK chewing gum market but Trident is the world's second-largest chewing gum brand. Richard Brittle, purchasing director at Hancocks, says: "It's a global brand and not a one-market wonder, so it's going to have a chance. If someone has a dominant position in the market it tends to get a bit arrogant and people will look at Trident and give it a shot. It will keep Wrigley on its toes."

The brand includes a number of products, from teeth whitening gum to gum pastilles with liquid centres, but Todd Stitzer wouldn't be drawn on what will be launched here. "We've got wonderful products around the world. We will have selected the ones most appropriate for the UK consumer. You'll have to wait for the launch," he said.

Stitzer couldn't hide his confidence in the brand, pointing out that when Italian gum brand Perfetti was launched into France the market rose by 16%.

"It would be premature to set out a market share target but we're not girding our loins to have a small market share. It wouldn't be worth it if we didn't expect to have something reasonably significant. "