Cadbury IT glitch takes £12m chunk out of profits

UK confectionary giant Cadbury Trebor Bassett (CTB) has taken a £12m hit on its profits after IT problems caused too many chocolate bars to be produced.

CTB was left with a glut of chocolate products at the start of the year, after the rollout of a new SAP-based enterprise resource planning (ERP) system led to an excess of chocolate bars building up at the end of 2005.

The build-up of chocolate bars caused by the IT problems was then exacerbated by a slow start to the UK confectionary market in 2006, when many people's New Year diets kick in after the over-indulgence of the festive season.

As a result CTB was forced to put hefty discounts on its product lines - which include Crunchie, Double Decker and Cadbury's bars - to clear the high levels of inventory that had built up. This led to a total hit of £32m on CTB's first quarter financial figures, £12m of which the company said was directly related to the IT problems.

Todd Stitzer, CEO of CTB's global parent company Cadbury Schweppes, cited "stock issues related to the implementation of new IT systems", adding that it had contributed to a challenging start to the year for the confectionery and drinks group's European region.

The new UK computer system is part of a five-year IT transformation project called Probe to integrate the Cadbury Schweppes' supply chain, purchasing, manufacturing, distribution, sales and marketing systems on a global, £200m SAP-based ERP platform.

Cadbury Schweppes is aiming for £500m efficiency savings from the Probe project but rollout has been far from smooth and the project was beset by problems and delays when it was first introduced in Australia in 2002.

The Probe ERP system was finally launched in the UK at CTB in July last year. A spokeswoman for CTB said the IT problems relating to the UK rollout have now been resolved.