Relentless Focus on Cost and Efficiency
We recognise that we can be much more profitable by simplifying the way we do things across all aspects of our business. Because we had become a complex business, our total cost base is higher and our margins are currently below our peer group average.
Our goal of increasing our underlying operating margins from around 10% in 2007 to mid-teens by end of 2011, has three core elements:
- A major group-wide cost and efficiency programme across all aspects of our business - in sales and administration, in the supply chain, in the regions and at the group centre. We are aiming to reduce the complexity in our business and minimise duplicated activities;
- Improving the performance in three key underperforming emerging markets – Russia, China and Nigeria; and
- Focusing relentlessly on profitable growth and where necessary, rationalising our portfolio.
Examples of the ways in which we are simplifying our business to reduce costs include:
- Managing our chocolate, candy and gum categories and biggest brands on a global basis rather than on an individual market or region basis.
- Combining local market and regional head offices, including in the UK where we are co-locating our central head office team with the BIMA (Britain, Ireland, Middle East & Africa) management team in a single office;
- Combining or clustering a number of markets into a single commercial organisation with greater scale and lower overall costs such as Canada and the USA;
- Outsourcing certain financing, accounting, IT and human resource processes to specialist third party operators; and
- Reconfiguring our manufacturing network, so that more of our production is focused in a fewer number of large scale plants. This will allow us to reduce costs and invest in new state of the art factories to support our growth agenda.