Functions
Global Supply Chain
The role of Global Supply Chain is to ensure the reliable supply of product to satisfy our customers' expectations whether manufactured by us or by a third party. Supply Chain's role encompasses sourcing of ingredients and packaging materials, planning, manufacturing, distribution and customer services. The function is responsible for managing the fixed assets of nearly 100 manufacturing facilities and over 250 warehouses.
Supply Chain is structured to enable 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, Global Supply Chain, supported by the four regional heads of supply chain. Key functional activities are managed centrally and operate on a global basis. They are focused on Technology and Manufacturing Development; Logistics and Customer Operations; Quality, Environment, Health and Safety; Procurement and Ethical Sourcing.
In 2006, a new strategy was developed which focuses on Fuel for Growth, Customer Focus for Growth, and Fit for Growth. We completed investments in new plants in Ireland, Thailand and India, and started building a new plant in Poland for gum. We invested in increased capacity for new gum packaging innovations, and centre-filled pellet gum in preparation for the UK launch in January 2007. Following the change to global categories, we realigned the Global Supply Chain organisation to support them, and started to develop category Global Supply Chain strategies.
We initiated a full review of policies, standards and procedures following the UK product recall, and from this we have developed a Quality and Food Safety Improvement programme. This programme follows the model of the successful Safety Improvement programme which in 2006 resulted in a 50% reduction in Lost Time Accidents across the Group.
The focus areas for 2007 build on those started in 2006, especially relating to global supply chain strategy, and supply strategy for developing regions, particularly Africa and India. Margin is a key focus for improvement through reductions in non-production spend and through low-cost country sourcing, initiatives in procurement, and through continued optimisation and improvement of asset productivity. We will step up our focus on the reduction of complexity in our product portfolios and supply chains, and on making sustained progress in working capital reduction.
We have also launched a programme to increase our focus on customers through better product availability, and further development of sales and operations planning.
Finally, through a continued focus on both safety improvement and quality improvement we will create a zero accident mindset and reinforce confidence in our standards and processes.
Global Commercial
The role of Global Commercial is to facilitate higher revenue growth from the business units than they could otherwise achieve on a stand-alone basis. Global Commercial defines category and portfolio strategy; ensures we have best-in-class commercial capabilities; partners with other functions such as Science and Technology and Supply Chain in creating innovation; and co-ordinates brand management, consumer insights, and our strategy for our global customers.
In 2006, we reorganised the function to focus on four global categories of chocolate, gum, candy and beverages. This will enable us to develop consistent, scalable and repeatable strategies for each category to be implemented in multiple markets. We expect that this, in turn, will allow us to co-ordinate, increase the size of, and accelerate the roll-out of our innovation projects, and consequently improve both our efficiency and our execution in the marketplace.
Each global category is led by a Global Category Director who reports to the President, Global Commercial. The Global Category Directors develop overall strategy for their categories with input from the regions and business units. They co-ordinate with regional category directors within each region, and category functional partners in other functions such as Science and Technology, Supply Chain and Finance. The global categories are also supported by innovation, market research and strategy managers.
In 2006, we completed the training element of our commercial capability programme and now have over 2,000 colleagues trained across the Group. The Global Gum Category team ensured the continued roll-out of centre filled gum with launches now in 13 markets and initiated the co-ordinated launch of bottle gum in nine countries starting with France.
Other Global Commercial initiatives included the establishment of world-wide co-ordination for our major global customers which was a key element in achieving higher rates of growth with these customers; as a result, a number of them awarded us preferred status on a global basis. We also established a global centre of excellence to manage our duty free channel and delivered strong growth in sales, profit and market share in this fast growing segment of the market.
Science and Technology
Science and Technology leads our technical innovation programme. This function 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 and funds technology developments which underpin our innovation agenda, including longer-term globally-applicable development programmes. It also co-ordinates nutrition initiatives as a key element of our food policy and together with Group Legal, 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 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 Science and Technology facilities as well as those of suppliers, and have a growing number of external collaborations with university, consultant and industrial partners. Our major Science and Technology facilities are at Reading, UK; Hanover Park, New Jersey, US; and Trumbull, Connecticut, US. The Reading facility provides science and technology support to the Group both globally and to the EMEA region and also supplies third parties. Hanover Park serves Americas Confectionery. Trumbull serves the Americas Beverages region. We also have several other 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 and Singapore.
In 2006, we continued to invest in our Science and Technology capabilities globally, expanding our headcount to over 800, and making new investments such as the Global Gum Centre in the US. Our enhanced technical skills and resources are now aligned behind our new global category structure. In 2006, we also strengthened our knowledge management processes and systems and formed a joint venture with the National University of Singapore to give us access to external expertise in this area.
A key technology focus area for Science and Technology in 2006 was on the application of new sweetener and flavour technologies in new products such as Stride gum, 7 UP beverages and centre-filled gum. We also strengthened our capabilities in nutrition, by appointing a Global Head of Nutrition, and formed an independent Corporate Nutrition Advisory Board, which comprises external scientific experts, and provides insight and advice on nutrition and health.
In 2007, we will continue to invest in technical capabilities, facilities and talent, and broaden our scientific collaborations with third parties. Our focus will be on continuing to expand our technology platforms, especially in areas such as flavour/taste and ingredient systems.
Human Resources
The role of our Human Resources (HR) function is to improve our performance by enhancing the effectiveness of our dayto- day working practices, the capabilities 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.
HR is organised to ensure delivery of our People Strategy. The HR leadership team combines regional HR generalists and central world-wide functional experts. The team leads the development of best practice, the co-ordination and ownership of global processes and the strategy for service delivery. The central team includes heads of specific areas such as remuneration and benefits, organisational effectiveness, resourcing and talent development. The regional HR directors are responsible for employee and organisational strategies for their region, and for managing 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. The purpose of these two departments is to protect, promote our reputation and facilitate opportunities for being values-led, consumerinformed 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; for driving the Corporate and Social Responsibility strategy within the business; for 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.
During 2007, we will focus on simplifying and making our global performance management systems more robust and effective and on the roll-out of our Passion for People programme.
Finance
The role of Finance is focused on a strong business partnership with the commercial operators in 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 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 managing our financial communications and relationship with the investment community.
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 and analysis, tax, treasury, strategy (including mergers and acquisitions), risk management, investor relations and IT.
Key recent priorities have included the implementation of new regulations and accounting standards, compliance with Sarbanes-Oxley legislation, 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 Americas Beverages, 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. In 2006, we started the process of transitioning the provision of financial transactions and processes for our entire organisation to a third party service provider in India to deliver further cash savings and greater efficiencies.
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 over the last three years and our active programme to dispose 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 2007, Finance's emphasis will remain on its role in providing strong business partnership to drive the delivery of the Group's new financial scorecard. This will be supported by a financial training programme designed to underpin our supply chain capabilities programme. We will continue to embed Sarbanes-Oxley compliant processes in our 2006 acquisitions of Nigeria and US bottling companies.
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.
We 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 function. As described above, it works with the Science and Technology function to manage our intellectual property portfolio, including defending our rights against threats or infringements.
We own a large number of registered and unregistered trademarks, copyrights, patents, designs and domain names throughout the world, along with substantial know-how, trade secrets and technology relating to our products and the processes for their production, packaging and marketing. We also possess many licences of these items where needed by the business. £3.3 billion has been included in the Group's balance sheet at 31 December 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(o) 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 2006 key legal achievements included: preparing for the launch of Trident gum in the UK and supporting the construction of a new gum factory in Poland; increasing protection of our patents, including by the successful validation and enforcement of the Recaldent patent technology in Australia, and strengthening resources in developing markets in the Asia Pacific region; and in the Americas, supporting the launch of our new gum brand Stride in the US. Legal also worked with the business to strengthen the route to market for Americas Beverages, including by the acquisition of Dr Pepper/Seven Up Bottling Group and other independent bottlers and enhancing our governance capabilities through the creation of a regional corporate governance initiative in Americas Beverages.
Production assets
| Number of manufacturing plants and bottling facilities as at 31 December 2006 | Confectionery | Beverages | Total |
|---|---|---|---|
| Americas Beverages | – | 24 | 24 |
| Americas Confectionery | 10 | – | 10 |
| EMEA | 35 | – | 35 |
| Asia Pacific | 18 | 7 | 25 |
| Total | 63 | 31 | 94 |
The Company owns all of the above facilities, except for three facilities in Europe, Middle East and Africa, one in Americas Confectionery, two in Asia Pacific and six in Americas Beverages, all of which are leased.
All the facilities are considered to be in good condition, adequate for their purpose and suitably utilised according to the individual nature and requirements of the relevant operations. We have a continuing programme of improving and replacing property when appropriate, to meet the needs of the individual operations.
The table below details our material properties, representing those sites with the most significant unmitigated loss exposures. All are manufacturing facilities and are owned by the Group except where indicated. These properties have a capacity utilisation in the range of 33-100%.
Material properties
| Location | Principal products | Area in '000 sq ft |
Production capacity in '000 tonnes |
|---|---|---|---|
| Aspers, PA., US | Beverages | 620 | 737* |
| Bertrand, Canada | Candy and Gum | 183 | 32 |
| Bournville, UK (part leasehold) | Chocolate | 1,766 | 140 |
| Cali, Colombia | Candy and Gum | 178 | 72 |
| Chirk, UK | Confectionery feedstocks | 261 | 53 |
| Claremont, Australia | Chocolate | 616 | 64 |
| Dunedin, New Zealand | Candy | 232 | 30 |
| Kent, Turkey | Gum | 820 | 64 |
| Overland, MO., US | Beverages, Concentrates | 199 | 161* |
| Puebla, Mexico | Gum | 408 | 101 |
| Ringwood, Australia | Chocolate | 610 | 52 |
| Rockford, ILL., US | Gum | 536 | 75 |
| Sheffield, UK | Candy | 503 | 53 |
| Somerdale, UK | Chocolate | 933 | 91 |
| Williamson, NY., US | Beverages | 578 | 492* |
* In millions of litres