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Cadbury takes wraps off £650m efficiency drive
But not-so-sweet job cuts on the way...

By Andy McCue

Published: Tuesday 26 June 2007

Confectionary and soft drinks giant Cadbury Schweppes is to cut the size of its IT department by up to a third as part of a new £650m four-year plan to slash group operating costs and increase profit margins.

The 'Vision in Action' plan aims to increase Cadbury profit margins from just over 10 per cent to the mid-teens by 2011. It will entail a radical programme of cost reduction that will see a 15 per cent reduction in global headcount and the outsourcing of back-office processing and IT.

In a trading update Cadbury CFO Ken Hanna said the company is aiming to save around £30m a year through a number of outsourcing initiatives around finance, accounting and IT.

He said: "We have recently signed agreements to outsource our global data centres to Hewlett-Packard and to downsize our IT organisation by up to a third in partnership with two IT outsource providers."

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Last year Cadbury created a global outsourced services organisation in India to handle all finance and accounting processes. Hanna said that deal with Genpact will result in 500 accounting jobs being migrated to India by the end of this year.

Cadbury UK took a £12m hit on its profits last year after IT problems caused too many chocolate bars to be produced. The glut of chocolate products followed the rollout of a new SAP-based enterprise resource planning (ERP) system.

That system was part of a five-year global IT transformation project called Probe which entailed implementing a £200m ERP system for supply chain, purchasing, manufacturing, distribution, sales and marketing.

But Cadbury Schweppes CEO Todd Stitzer admitted in the trading update that the "fraught" implementation of the Probe ERP system resulted in a loss of commercial focus that led to company revenues not growing and profit margins declining.

He said: "With great accomplishment always come a few setbacks, IT implementation, product recalls, accounting misstatements in Nigeria and commodities prices have been ours."