Annual Report and Accounts 2006

Embed core processes to improve business planning

In 2006, we continued to improve our capabilities across all aspects of our business, including commercial, science and technology, supply chain and information technology, to enable us to deliver our growth and cost saving agenda.

In Global Commercial, we have now trained over 2,000 sales and marketing colleagues in our Building Commercial Capabilities programme, providing them with a standardised framework to determine how we can best win in our markets.

To exploit the advantages of this single global approach, we reorganised our Global Commercial function, creating a global category structure for each of our three confectionery categories - chocolate, gum and candy - and one for beverages. These changes will enable us to better exploit our category strengths, and focus our resources behind fewer and bigger initiatives which we can leverage across multiple markets. Within these categories, we have also identified a small number of growth platforms which we believe will account for a disproportionate percentage of our growth in the future, and which will therefore receive the most resource. Tamara Minick-Scokalo joined us in January 2007 as President, Global Commercial to lead this new category organisation.

We have also continued to invest in our Science and Technology capabilities. Science and Technology annual spend has increased by £27 million since 2003, and we have invested in people, facilities and infrastructure, including opening three new Science and Technology facilities. We have continued to develop our capabilities in the key areas of: sweetener and flavour technologies; new ingredients process, product forms and packaging; and nutrition. We have also significantly increased external partnerships to speed up and enhance product development. We expect to increase our Science and Technology spend by around half a percent of revenue over the next few years.

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Focus on Supply Chain and transform IT

In October, we announced that we would further aggregate and standardise support services such as IT and back office services, and outsource these where we could gain efficiency savings.

We are creating a global outsourced Shared Business Services organisation to handle back office processes such as invoicing, payroll and travel. This builds on the highly successful creation of a similar Shared Business Services organisation in North America.

In IT, our approach is similar. We are seeking to exploit our global platforms, roll out low-cost modular IT enhancements, and outsource processing and data centres to lower-cost environments.

In supply chain, we continued to improve the efficiency of our manufacturing, distribution and procurement. Our approach is to create efficient manufacturing centres with critical mass, such as our Halls plants in Canada and Colombia, and our gum manufacturing centres in Mexico and Rockford, US.

In 2006, we began construction of a new gum plant in Poland which is due to begin production in 2008. This will replace higher-cost third-party production and provide capacity for expansion. We are also completing construction of a new gum plant in Thailand which will supply Asia-Pacific markets. In beverages, following the acquisition of the bottling companies, we began to improve the efficiency of our US beverages manufacturing network to allow us to produce closer to our customers, increase availability and responsiveness, and reduce our distribution costs.

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