Supply Chain Management Consulting for the Food&Beverages Leader
Content CoDRINK: Supply Chain Challenge 3 CoDRINK & Milky Company: Goals at Russian Market 4 New CoDRINK Supply Chain Model 4 Assignment 5 Accenture Supply Chain Management 5 Accenture Supply Chain Management 5 Attachments About Accenture 7 Food&Beverages Trends 13 Global Food&Beverages indicators 16 Russian Food&Beverages Indicators 17 CoDRINK Financial Indicators 19
This case offers students an opportunity to put themselves in Accenture consultants’ place and compose a proposal for the Russian subsidiary of a major Food&Beverage company in Supply Chain Management field. At the same time students should think over marketing conception of the resulting solution and present it to the Managing deirectors of Accenture.
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2 | Content
CoDRINK: Supply Chain Challenge Timofey, Manager of Operations at Accenture, poured a cup of strong coffee and sat down to his kitchen table in front of the laptop. It was still dark outside, the window was ajar bringing the smell of approaching winter and the sounds of waking-up city. Following his habit, Timofey started his morning with looking through his calendar for the day – making it easier to set his mind on work and plan his tasks.
3 | CoDRINK: Supply Chain Challenge
The previous evening brought good news that his company had expected for the last week: CoDRINK , a large company and one of the world leaders in Food and Beverages market, had shortlisted the Business Proposal of their company for further consideration. The project promised a very interesting perspective, provided that CoDRINK had recently acquired MilkyCompany - a major player in the Russian dairy products market. Consequently, it required support to integrate the supply chains of CoDRINK Russia and Milky Company. In fact, they needed to create from scratch a complex logistics framework within the renovated company. Timofey understood that solving such task would require processing a vast amount of data, that is why he sent a straight away request for CoDRINK to provide the necessary information and looked through the internal Accenture knowledge database, and chose several documents that seemed most relevant for him to familiarize with.
Timofey added a meeting to his calendar for the following day: “14:00 – 17:00. SCM -project for CoDRINK/Prepare offers for short list” and with a couple of clicks sent invitations to his consultant team – Dmitriy, Anna, and Julia, who had assisted him in preparing the Business Proposal. Their next move should be preparing a year-long pilot project for the customer. However, before such project is put into operation it has to be approved by Accenture Managing Directors via public hearing. Timofey did not put high hopes on potential client easily providing all the requested information, so he was getting ready to spend much time searching Accenture database and open sources, and also to divide search areas among his colleagues. The deadlines were very tight – a ready proposal was required in a week’s time. His telephone resting on the table gave a quiet liquid sound of received text message. Timofey was astonished – early in the morning the client confirmed information transfer and invited to sign a Non-Disclosure Agreement in the nearest future.
As early as next midday the Agreement was signed and the long-awaited files were received. Timofey got comfortable in his arm-chair and impatiently plunged into studying charts of stately proportions provided by the client. He was pleased to find out that all the critical data was present in the charts, and it was possible to use them as a basis to start research. Timofey ran his eyes over the list of warehouses and distribution centers, annual demand forecast, rates of client’s transport contractors. The workload was considerable. “It would be a good idea to properly analyze and quantify the complex supply model, he thought, but provided the limited timeframe we should focus on the pilot project first. But, actually, there is an interesting question: what principle we should use to choose products and cities for the pilot? Indeed we have a wide variety of options. How can we limit this choice, in order to further generalize the results over the whole supply system?”. Timofey had quite a large experience of consulting work, and he had repeatedly faced such challenges, that is why he understood that defining the boundaries of pilot project accounted for nearly half of successful new development. He interrupted his speculations and decided to seek advice from his colleagues, who had expert knowledge in building optimal supply chains, and he scheduled a meeting with his colleagues bringing forward a list of questions to discuss.
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Operations, http://www.accenture.com/ru-ru/Pages/service-operations-services-overview.aspx
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CoDRINK Company is fictional, alongside with all related facts and figures. Any similarities are coincidental
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Also short-list is a list of the most probable candidates to run the project, chosen from all the participants of a tender
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MilkyCompany Company is fictional, alongside with all related facts and figures. Any similarities are coincidental
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Supply Chain Management
CoDRINK: Supply Chain Challenge CoDRINK & Milky Company: Goals at Russian Market One hour before the meeting Timofey decided to look through client profile again. While preparing the Business Proposal for CoDRINK, he became well familiar with the business of the company, but to be on the safe side he decided to update his knowledge of the company before the discussion. He opened a presentation under a flatulent title “CoDRINK: Leading Global Food&Beverages”, which, as a matter of fact, was exactly the case. CoDRINK – is an international corporation selling its products in more than 200 countries and territories all over the world. The company has historically been managed as a loose federation of countries and regions. Starting in 2010 and accelerating in 2012, CoDRINK began to modify its global operating model, balancing independence and scale, to become a globally networked company. Its in-country and regional teams are empowered to serve their markets, but through global groups and functions, the company is harmonizing its efforts across the world around brand building, innovation and the management of the supply chain.
CoDRINK Russia is one of the leading players in Food&Beverages market in Russia with net revenue amounting to RUB 330 Bln, which operates in 4 categories: Beverages, Juices, Snacks and Baby Food. Milky Company is one of Europe’s largest dairy products companies. The company is headquartered in Moscow, Russia. The company produces yogurt, milk, flavored milk, fruit juices, and other soft drinks CoDRINK have recently acquired Milky Company, buying 77% of shares for RUB 165 bln. The purchase makes up one of the biggest foreign investments yet seen in Russia outside the energy industry and have been widely discussed in media. Recognizing importance of Russian market for the whole business, CoDRINK is stepping into initiative for definition of specific business strategy addressing local market. One of the strategy’s key elements is Supply Chain, which has to meet strategic business objectives as well as territory challenges (regulatory, infrastructure availability, traffic, etc) effectively.
CoDRINK Russia revenue in Central Federal District amounts up to RUB 100 bln making approximately one thirds of total company net revenue and about a half of net operating profit before tax. CoDRINK hold quite solid competitive positions; however its brands equity strength is not always as strong as the country average level due to the market high proliferation and competitiveness.
New CoDRINK Supply Chain Model Having looked through the general information about the company, Timofey went deeper into studying the peculiarities of company’s supply chain. He ran through received from CoDRINK databases and letter of explanation, from which he deduced several important facts. In particular, the letter specified that in the framework of the project of supply chain integration CoDRINK Russia considered several warehouses in different Russian cities, where the company stores its products, including 3 types of carbonated beverages, 2 types of milk beverages and one type of yoghurt. They are transported mostly by road or air.
A characteristic feature of CoDRINK supply in Russia is the fact that the demand for beverages in different cities is practically constant regardless of the season. For Russia the level of dairy products consumption is traditionally high, and soft drinks are highly popular not only in summer, but also during holidays, thus virtually levelling demand throughout the year. Alternatively, supplies for some production areas vary depending on time of year, which is related to seasonal nature of producing certain product components (e.g. agricultural raw materials). Also Timofey found out that CoDRINK aims to guarantee consistent transport tariffs, and to achieve that it enters into long-term contracts with transport companies. The company does not have its own cargo fleet, yet it enjoys much flexibility related to choosing transportation routes. However, such strategy has its drawbacks – shipment volumes directly depend on the vehicles used by transport contractor in a particular route. In the majority of cities CoDRINK has its own warehouses, which it operates independently. In certain cities, such as Moscow, where the company does not have proprietary warehouses, it uses a 3PL operator and pays for its services at the end of the year based on cubic meters used. Timofey’s agenda for the meeting with his colleagues includes the following items:
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The information presented in this section is an assumption to the supply chain model.
4 | CoDRINK: Supply Chain Challenge
Assignment 1
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Find a specific solution for development of CoDrink and Milky Company supply chains and provide a mid-term (3 years) solution integration road map
Prepare presentation for the company’s managing directors covering the draft solution marketing strategy:
a) Define the pilot project area. What will be the basis for the project pilot area selection? How should the pilot project area be selected so that it can be easily rolled out to cover the entire CoDRINK Russia?
c) Define added value from the pilot project implementation.
a) How will the project results be employed in the future?
d) Create road map of the pilot project results roll-out to entire CoDRINK company. What will be the timing of the project implementation? What results are to be achieved?
b) How can the resulting solution be customized and implemented with other clients?
b) Develop logistics model for the pilot project. What haulage operations shall become a part of this model?
5 | Assignment
c) How can the solution be expanded? What other services can improve quality of such solutions for the client? d) Create presentation in proper format
Accenture Supply Chain Management Timofey finished noting down agenda items and took a look at his watch. Ten minutes remained until meeting with his colleagues. He sent the agenda to printer and decided to use the remaining time looking for useful information sources inside Accenture. He first opened a list of Accenture Supply Chain Management
(SCM) services. The list gave a general description of the projects that were successfully implemented by Operations. Timofey visited the internal portal page and spent a couple of minutes looking at the profiles of managing directors who would soon listen to the presentation of Timofey and his team.
Faces of Operations Practice in Russia
Howard Polinski
Andrey Skorochkin
Howard is a Partner of Operations practice in Accenture Russia. He has more than 12 years of Operation consulting experience with deep knowledge in project management of large, complex and lengthy projects (operational restructuring, transformation, sourcing, supply chain, organization, business process reengineering, programme).
Andrey is a Managing Director for Operations practice in Accenture Russia. He has over 10 years experience in Operation consulting with deep knowledge in Operating Model design, Supply Chain transformation and Operation Strategy development.
Managing Director, Business Operations, Accenture Russia
Managing Director, Business Operations, Accenture Russia
The Accenture Supply Chain Management service as a part of Operations Practice line works with clients across a broad range of industries to develop and execute operational strategies that enable profitable growth in new and existing markets. Committed to helping clients achieve high performance through supply chain mastery, we combine global industry expertise and skills in supply chain strategy, sourcing and procurement, supply chain planning, manufacturing and design, fulfillment, and service management to help organizations transform their supply chain capabilities. We collaborate with clients to implement innovative consulting and outsourcing solutions that align operating models to support business strategies, optimize global operations, enable profitable product launches, and enhance the skills and capabilities of the supply chain workforce. Committed to helping clients achieve high performance, Accenture combines global industry experience and skills in supply chain planning and strategy, sourcing and procurement, manufacturing, product design, fulfillment and service management to help organizations transform their supply chain capabilities. Accenture collaborates with clients to implement innovative consulting and outsourcing solutions that align operating models to support business strategies, optimize global operations, enable profitable product launches, and enhance the skills and capabilities of the supply chain workforce Accenture works with its clients to address key business issues such as:
6 | Accenture Supply Chain Management
• Quantifying and optimizing levels of product and process complexity. • Innovating faster and better than our competition. • Integrating technology and process excellence. • Exhibiting flexibility when responding to unpredictable market shifts. • Increasing productivity without impacting headcount. • Managing costs efficiently and effectively. • Decreasing supply chain talent gaps and turnover. Areas of experience include operations and process transformation; sourcing and procurement; innovation and product development; manufacturing strategy and operations; service strategy and operations; integrated planning and fulfillment; and supply chain education. Accenture offers a variety of services to address all aspects of a supply chain transformation journey, from strategy and operating model, to process and technology enablement: • • • • • • • •
Business Process Management Innovation and Product Development Integrated Planning and Fulfillment Manufacturing Strategy and Transformation Operations and Process Transformation Service Strategy and Operations Sourcing and Procurement Supply Chain Academy
Out-of-the-box thinking requires out-of-the-box doing.
About Accenture Today Accenture is a global company found in 1989. More than 275,000 employees serve clients in 120 countries all over the World in order to provide high quality service in management consulting, technology services and outsourcing. Accenture’s clients span the full range of industries around the world and include more than 2500 companies. The majority of them are World leaders: 91 of the Fortune Global 100 are Accenture clients. Accenture is focused on developing longlasting strategic relationships with its clients: 99 of its top 100 clients by the end of 2012 have been clients for at least five years, and 92 have been clients for at least 10 years. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Today Accenture is a global management consulting, technology services and outsourcing company, with approximately 275,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become highperformance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013.
8 | Attachments | Accenture Today
The company is strongly differentiated in the marketplace because it builds enduring, trustbased partnering relationships with clients. The company focuses on value creation and business outcomes as well as harnesses deep industry, process and technology experience as well as large-scale, complex change capabilities. Accenture has offices and operations in more than 200 cities on six continents. The geographic footprint and diversity are competitive differentiators for the company, enabling it to provide the same high level of service to clients anywhere they operate. Russia is a priority market for Accenture. Having operated in Russia since 1992, Accenture is uniquely positioned in the market to offer full range of capabilities required by its clients. In combination with its worldwide best practices and deep understanding of the Russian business environment, Accenture professionals in Russia possess deep industry expertise across the 18 industry groups. Currently Accenture Russia office has more than 700 management consulting and technology services professionals.
Более 275 000 сотрудников по всему миру
Accenture is one of the world’s leading organizations providing management consulting, technology and outsourcing services. Accenture ís «high performance business» strategy builds on the company’s expertise to help clients perform at their highest levels so they can create sustainable value and realize their strategies, taking their places among the largest players in the global business. ‘High performance. Delivered’ - says world-famous Accenture’ motto. And that is true: the company’s goal is to combine the best intellectual and technological resources from around the world to improve the competitiveness and efficiency of Russian business leaders - today, tomorrow and for years to come. This approach has already bear fruits to many Russian clients from various industries and segments of the domestic market.
More than 275 000 employees all over the World — one and a half times the population of Geneva
Более 700 росс международны работают в Acce More than 700 Russian and 50 foreign experts work for Accenture in Russia
About Accenture It is worth noting that Accenture is unique in combining experience of the world’s leading experts – both in management and specific industry - with a deep knowledge of modern technological solutions and wide experience for the local business. One of the most important priorities is to find the best solutions for the client’s business innovations - those that can be implemented and produce results. Accenture is aimed at improving efficiency of the customer – it is possible only through the successful implementation of innovations. Accenture specialists continuously monitor all the «breakthrough» technological and management innovations each time carefully considering them for practical application for the clients.
Accenture always takes the responsibility for the final outcome of any business project: those results are usually measurable. It is not just words - confessing responsibility for the result, the company offers clients to share financial risks and be rewarded by the results of the project. Therefore, Accenture is always responsible for all components of the implemented changes. The company has significant experience in the implementation of the most complex and the most ambitious projects for the leaders of world and domestic business. Of course, the position a global leader in outsourcing helps: creating and then helping to exploit the largest information systems day after day, the company is well aware of how they work and how to build them so that they work well for long.
Accenture has an aggressive focus on driving local growth in key core markets, particularly by increasing share of wallet at their largest clients, as well as by the addition of new clients. Accenture pays great attention to research. They is published through the Accenture Institute for High Performance, which applies academic research to the problems facing today’s businesses and organizations. Many of the published works appear in major international newspapers, such as the Financial Times, Harvard Business Review and The New York Times, as well as magazines and journals, while others have a more limited circulation as research notes and papers in books. Outlook, the firm’s online magazine about business performance, tackles topics from software applications to industry developments to international business issues.
The company has a history of technology innovation and implementation, including research and development capabilities, on which it spends approximately US$400 million annually. To achieve this Accenture leverages its proprietary assets and Global Delivery Network to provide clients with highquality solutions, lower costs and quicker results. The company’s services are broader than those of many other providers in the marketplace, including local niche players, as Accenture offers an end-to-end lifecycle delivery approach, from design through execution and management of a solution. Regarding the team, Accenture fosters a culture of innovation, collaboration and teaming and attracts and develops excellent talent.
Revenue on August 31, — $28,6 bln That makes up 13% Russian budget in 2013
9 | Attachments | Accenture Today
Performers follow conventions. High performers break from it.
Accenture History
No doubt Accenture is a story of great success. The exists for over 60 years. During this time, it has gone a long way from being a pioneer in the newly arisen world of information technology in the 1950s, before inclusion in the Fortune Global 500 list as one of the industry leaders. Accenture was formally established in 1989 originally known as Andersen Consulting. At that time a group of partners, from consulting divisions of multiple member firms in Arthur Andersen, created a new organization to provide management and technology consulting services, focused on complex systems integration and business process development.
That year, Accenture officially began offering business integration services, supporting companies in coordination of human resources, processes and technologies in line with their business strategies. The main goal was to improve business efficiency by improving the work of all its components. As years passed Accenture evolved from a system integrator in an international company specializing in management and technology consulting. Accenture has the whole range of services in consulting, outsourcing and information technology at its disposal.
Россия — стратегический рынок для Accenture с 1992 года
Russia is a strategic market since 1992
11 | Attachments | Accenture History
A New Name, A New Direction By 2000, Accenture had achieved more than a decade of tremendous growth, with net revenues exceeding US$9.5 billion and more than 70,000 professionals in 46 countries delivering to clients a broad range of consulting, technology and outsourcing services and solutions. On Jan. 1, 2001, the company changed its name from Andersen Consulting to Accenture. One of the largest and most successful re-branding campaigns in corporate history was launched then. The new name reinforced Accenture’s new positioning and reflected the organization’s further growth and broadened set of capabilities.
Accenture – ровесники
ЕС
Accenture is the same age as the EU
Since its inception in 1989, Accenture had operated as a group of locally owned independent partnerships or other entities in more than 40 countries. (Accenture has always been a global organization and has never operated under a U.S. holding company structure.) By 2001, it became apparent to Accenture’s partners that maintaining the organization’s existing partnership structure would limit the company’s ability to continue its growth. Therefore, the partners, more than half of whom were from countries other than the United States, decided to transition to corporate form, enabling Accenture to build and acquire the necessary capital to remain competitive and fuel its growth. In April 2001, Accenture’s partners voted overwhelmingly to pursue an initial public offering, and Accenture became a public company on July 19, 2001, when it listed on the New York Stock Exchange under the symbol ACN.
Accenture Global Strategy Accenture Global Strategy Accenture operates its business with a simple philosophy of keeping one foot in today and one foot in tomorrow which means that the company executes its current operating plans with commitment and discipline, while also investing in the company and positioning Accenture for the future. Accenture’s Market strategy encompasses service lines, industries, offerings, new business models and new practice areas. Accenture is actively developing in three directions: 1. Growth in the core business. This includes the vast majority of consulting, technology and outsourcing services it has traditionally provided through the growth platforms and operating groups. The renewed core is vibrant, powerful and incredibly differentiated. The core business is a baseline and primary growth engine. Accenture sees significant opportunities and headroom for growth in core management consulting business across all seven service lines.
2. Growth through new initiatives and businesses, which include analytics, digital marketing, mobility, smart grid and sustainability, as well as new technology areas such as Cloud computing, cyber security and many others. The company is building these new initiatives on top of the core and many have the potential to become billion-dollar businesses for Accenture. 3. Growth through geographic expansion in strategic growth markets of Russia, Brazil, India, China, South Korea and Mexico. The company expects to grow revenues in these markets by more than 20% annually, on average, over the next few years. Geographic growth is essentially about taking all of the elements of the core business, as well as new initiatives — and providing those services in more places around the world than currently. There is a separate program focused on six strategic growth markets.
Business Structure Accenture services are grouped by 4 sectors, specializing in communications and high technology, financial services, products and resources. All industries make equal contribution to the company’s revenues, which in fiscal 2013 amounted to $ 28.6 billion. All groups covers a wide range of 19 industries ranging from aerospace manufacturing and mining to automobile, chemical industries, finance, media and logistics. Accenture provides 3 types of services to its clients: management consulting, technology services and business process outsourcing.
Management Consulting Management consulting market requires more pragmatic and result-oriented consulting services. At the same time, management consulting is one of the fastest growing elements of Accenture business model. Both of these factors provide large opportunities. Accenture uses them, expanding the range of services to various industries, as well as strategic market development.
Accenture management consulting division is one of the largest in the world with more than 17,000 consultants worldwide. Over the past three years, the company’s specialists have worked for all top-ten Fortune companies and for 63% of Fortune 500 companies (about 315 out of 500). Key services: • Strategy. Projects on develop business strategies for the whole enterprise, as well as individual units, aimed at sustainable growth, based on a clear analysis and ready for implementation. • Marketing and Sales. Projects on digital marketing, marketing analysis and media-management, sales performance management, assortment optimization, promotion. • Operational efficiency and Lean Six Sigma. Projects on developing operating strategy and enterprise operations transformation: supply chain management, optimization of logistics and procurement functions, innovations,Lean Six Sigma concepts and implementation of lean production techniques • Finance. Financial Management projects are aimed at transforming the financial functions of the company (accounting, consolidation, management accounting, budgeting
12 | Attachments | Accenture Global Strategy
Accenture Global Strategy systems, cost management, treasury, etc.), development and implementation of Shared Service Centers models. • Risk Management. Risk management projects are aimed at optimizing the balance between risks and financial results, bringing the risk management system in compliance with the standards and requirements. • Talent and Organizarion. Projects on optimizing the organizational structure, competencies management for the strategy implementation and staff training, changes management during the transition to new operating models
Technologies Accenture is a world leader in systems integration and technology consulting. The company has a vast experience of successful work for the world’s leading corporations in this area. Like other services, success is determined with effective combination of global expertise and deep understanding of how business works in specific countries. As a result, Accenture offers a full range of technology solutions to support the implementation of business strategies and improvements in efficiency in various business areas. Key services: • Technology consulting. Includes a wide range of solutions, from IT strategies to specific IT infrastructure optimization tools and applications. Main directions are: • strategy creation and transformations in IT; • infrastructure design - advising on information security; • information management; • applications optimization and upgrading.
13 | Attachments | Accenture Global Strategy
• System integration: • cloud computing; • mobile solutions; • Oracle solutions; • SAP solutions; • Microsoft solutions. • Accenture Technology centers (Accenture Technology Labs). Accenture four technology centers are located in major industrial parks of the world: Silicon Valley and Chicago (both - USA), Sophia Antipolis (France) and Bangalore (India). They are company’s own laboratories, leading research activities in the interest of business. In that centers Accenture specialists are developing new technologies to solve customers’ business problems, combining extensive technical and scientific developments with business methods, and creating innovative strategies for the future on the basis of independent research. Main activities: biometrics, virtual infrastructure, diagnostic services, Web 2.0, cloud computing, sensor technologies, etc.
Outsourcing of Business Processes Accenture Business Process Outsourcing team provides business processes that help clients transform their businesses, achieve higher levels of performance and results, and/ or reduce costs. Through BPO services, the company manages specific business processes or functions for clients, providing solutions that are more efficient and cost-effective than if the functions were provided in-house. According to the world leading outsourcing industry association The International Association of Outsourcing Professionals ™ (IAOP ™), Accenture is a global leader in outsourcing. The company has considerable experience in applications, infrastructure, business processes outsourcing, as well as complex outsourcing projects. Many Russian clients of Accenture have already taken advantage of this experience, resulting in significantly reducing costs and streamlining business processes. Key services: • • • •
Business Process Outsourcing; IT outsourcing; Applications Outsourcing; Infrastructure Outsourcing.
â‚Ź1 billion in savings for Unilever. Without any tangles.
Accenture Project in Russia — hot quotes
Vladimir Vershinin
Director, Department of Performance and Strategic Development, USS BN RiD, TNK-BP
Alexey Soldatenkov
“Establishment of United Multi-Purpose Service Centre was one of RosAtom business transformation program components. The Centre covers all functions as it is a horizontal structure that aims at improving all industry enterprise supporting tasks. Accenture is, without any doubts, one of the world leading providers in such projects, but we had to have a clear understanding of what was ahead. Accenture organized a business trip to Statoil Hydro MultiPurpose Centre in Norway, and this example became a reference point for us.”
“It is crucial to strike the right balance and make sure that the set of tools matches the specific stage of business development. There are two extremes here: we can pursue only economic efficiency (and even achieve it) or on the contrary, undertake a cultural transformation (which is unclear in quantification). Chasing both these extremes is wrong – there should be a reasonable balance”.
General Director, Greenatom (GK RosAtom)
“Switching to supply chain management system implies a whole range of various activities, which in the end aim at improving the company overall performance at three levels of company operations. The first level is the business processes; the second level is the company itself; and, finally, the third level is people” In 2004 TNK-BP company management made a decision to upgrade the company procurement system. The core of the changes was switching from traditional procurement to the supply chains management system. Integrated approach to procurement optimization with account for supply chains transformation called for moving away from traditional procurement routine, new supply methods, improved control over transformed business processes, optimization of organization chart, and competencies management.
Mikhail Ermolayev
As a result, over half of TNK BP procurement costs were covered with long term agreements. The number of claims from TNK BP to contractors decreased two-fold, and quality of certain purchased units increased one hundred times. Accenture also helped TNK BP to train its personnel with materials from Accenture Supply Chain Academy serving as the basic study materials.
15 | Attachments | Accenture Project in Russia — hot quotes
Accenture helped Greenatom to implement the Multi-Purpose Centre by providing a full package of services, starting from feasibility study of the centre implementation, cost estimation of each particular function and estimation of effect from switching function to united centre, definition of design quality parameters with development of formal quantitative assessment method, and finishing with the centre actual integration and start-up.
Development Director at BSS OAO Severstal
Accenture helped Severstal company to increase operational efficiency through introducing the concept of lean production. This project was preceded by several important projects, which laid the foundation for future business processes evolution in the company. The first project started in 1998 under the title “Total Optimization of Production”, followed by “Production Consulting” in 2000, and “Permanent Streamlining” in 2010. These programs were relatively isolated, but they paved the way for the introduction of lean production concept.
Food&Beverages Trends Global F&B trends The global F&B sector is believed to reach the value of $7 trillion by 2014. The food and beverage industry has always been one of the biggest. The food retail industry is expected to reach $5 trillion in value by the end of 2013. At present, approximately 58% of produced food is consumed by developing countries. This is expected to climb to 72% by 2050 supported by the fact that 37% of the world’s population currently lives in China and India. However global macroeconomic growth has slowed significantly, and the economic power is becoming more distributed.
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IMAP, F&B Global Report
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According Standard & Poor’s Global 1200
Beverage Value Market Share
The problem is, companies will have to grow collectively by 4.7 percent in 2013 and again in 2014 to justify their end-of-2012 share prices . That’s a tall order, considering that GDP growth in much of the developed world was low or even negative for 2012. Emerging markets continue to be considered as the key growth driver. But the growth of emerging markets is also slowing, as a result of which the ability to offset on-going problems in recovering developed markets such as Western Europe has been substantially reduced. For instance India’s growth rate in 2012 was its lowest in a decade, and Brazil’s has declined significantly over the past three years. There remain a few hotspots, but not enough to provide all of the growth that companies need. Significant new growth driven by demographic shifts, such as aging populations, is also unlikely to be the truth.
Kraft CoDRINK Nestle Coca-Cola Other
2% 16 % 22 % 36 % 24 %
Source:Accenture, Earnings Update: Home and Personal Care, Food and Non Alcoholic Beverages, October 2013
16 | Attachments | Food&Beverages Trends Global F&B trends
Market consolidation and competition drive investment in innovation and promotions, as companies respond to evolving consumer trends. Innovation and marketing investments continue to be a key way for companies to differentiate from the competition, enabling them to offset volume declines through pricing. The increasing threat from private label will continue to drive investment in brands, with global manufacturers focusing their promotional and research spend on their largest brands to differentiate through innovation, building brand equity. Fragmented media landscapes and more demanding consumers mean that the cost of building brand share will rise, requiring a multichannel, engagement driven marketing approach.
Food Value Market Share Nestle CoDRINK Unilever Mondelez Danone General Mills Kraft Kellogg’s Heinz Kerry Aryzta
9% 6% 4% 4% 3% 2% 2% 2% 2% 1% 1%
Other
65%
Source:Accenture, Earnings Update: Home and Personal Care, Food and Non Alcoholic Beverages, October 2013
Key issues driving the industry forward Health/nutrition Convenience Price/growth pressure Regulation M&A/consolidation Attracting talent Client relations issues Supplier/retailer relationship Premiumization More brand-led Managing/cutting costs Innovation Sustainability/environment Rising disposable income More out-of-home consumption
97 % 66 % 54 % 54 % 52 % 51 % 51 % 49 % 48 % 46 % 43 % 40 % 39 % 37 % 36 %
Source: Deloitte
Global F&B hot quotes
Franck Riboud
Jørgen Buhl Rasmussen
Paul Bulcke
“2012 confirmed in spectacular manner the profound shift in the global economy that is gathering apace. Management’s responsibility consists of adjusting its strategies quickly and rethinking its company organization in order to take advantage of the growth momentum in the new economies while regaining maneuvering room in Europe. Significant changes are underway to enable Danone to reinvent itself in response to this new global environment.”
“The project will be a key enabler for the transformation of our Western European operating model, with all procurement, production, planning and logistics across the region being centrally managed, supported by standardized processes and data and full transparency. Impacted by a challenging macro and consumer environment and bad weather during the summer, the Western European market declined overall by around 3 percent [excluding a strong-performing Polish market] in 2012,” Rasmussen says. “The Russian beer market was flat for the year while the Asian markets continued to grow.”
“PPP accounts for about 15 percent of our total sales now. It is the whole way of going about meeting the needs of the emerging consumer. We want our consumers to trade down or up, but not to trade out. One of Nestlé’s strengths is that we have found a way of being decentralized, allowing our scale to play in our favor through having aligned R&D and innovation processes, and yet coordinating the whole business through the strategic business units”
chairman and CEO of Danone
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president and CEO of Carlsberg
Popularly Positioned Products — PPP, http://www.research.nestle.com/resources/dictionary/popularly-positioned-products
17 | Attachments | Global F&B hot quotes
CEO at Nestlé
Food&Beverage in Russia
Russian F&B market can be divided into five large segments: dairy market, chocolate market, beverages market, coffee market and salty snacks market. All these segments heavily depend on macroeconomic factors such as purchasing power and inflation. Continued growth of disposable income will establish a solid foundation for purchasing power growth over the next 5 years and will move Russia closer towards the level of developed countries. The share of spending on food and beverages as a percentage of total expenditure should continue to decrease from 29% in 2012 to 26% in 2015. The expected slow down in consumer price growth from 2012 to 2015 will help boost per-capita consumption across major food and beverage sectors; however consumer price inflation will be higher.
9
10
Russia is amongst the top list of dairy consuming nations and still has potential for further per capita consumption development. The dairy market is one of the largest in the Russian F&B sector in terms of volume. It is expected to continue demonstrating the fastest growth in value terms approximately 9–13%), which is mainly driven by dairy prices growing faster than general consumer inflation due to a deficiency in raw milk. Other market growth drivers are increase in consumption and a continued shift towards yogurts and deserts. The dairy market is highly dependent on sourcing of domestic raw milk. Milk production in Russia is currently stagnating due further reduction in dairy cattle and the continued use of outdated technology. This has generated a 20% deficit in domestic raw milk. Imported raw milk (>20%) and dry milk (~70%) is mainly from Belarus.
Popularly Positioned Products - PPP, http://www.research.nestle.com/resources/dictionary/popularly-positioned-products
10
Based on ‘Focus: Russian F&B Market’ KPMG, Nielson & Euromonitor
18 | Attachments | Food&Beverage in Russia
The Russian chocolate market is expected to grow by approximately 7–11%1 in value terms. The key growth driver is expected to be overall increase in per capita consumption, which is fueled by new products and varieties (e.g. snackable packaging formats, new tastes and flavours). Further, value growth will be driven by an expected increase in cocoa beans prices which will translate into chocolate price growth. The beverage market is one of the fastest developing markets in Russia. Total volume grew by approximately 12% in 2010 and are expected to level at an annual growth of 7% by 2015. The main factor determining the situation on the market will be continued innovation in colas, lemonades, ice tea and kvass will further shape the market.
The coffee market is expected to demonstrate the slowest growth in terms of both volume (approximately 2–4%1) and value (approximately 7–10%1) as it is almost fully developed and has nearly reached saturation point in Russia. The salty snacks market is expected to grow at a rate of 9–12%1 until 2015 and is driven by the highest lag in per-capita consumption (vs. the EU), however, some categories (e.g. fish) are likely to decline due to market saturation.
Global Food&Beverages indicators Top-20 F&B Global Companies ( Sales, $ mln, 2013) 87,977
NestlĂŠ 65,492
PepsiCo, Inc. 48,017
The Coca-Cola Company
46,829
Archer Daniels Midland Company 39,758
Anheuser-Busch InBev
38,675
JBS
35,015
Mondelez International
34,487
SABMiller
33,278
Tyson Foods
32,5
Cargill
31,18
Unilever
30
Mars
26,92
Danone
23,715
Heineken
22,13
Kirin Brewing Co. Lactalis Suntory
20,255 19,37
Asahi Breweries
18,85
Kraft Foods Group
18,339
Diageo
17,005
Source: www.foodengineeringmag.com
19 | Attachments | Global Food&Beverages indicators
Global Food&Beverages indicators Basic Financial indicators of Accenture largest F&B clients
CoDRINK Reporting period
Net Sales ($m) Cost of Goods Sold ($m)
EBIT ($m)
Net Income ($m) Annualised EPS ($)
HY13
HY13
HY13
FY13
FY13
HY13
HY13
HY13
HY13
HY13
HY13
HY13
Jan-Jun
Jan-Jun
Jan-Jun
May-May
May-Apr
Jan-Jun
Jan-Jun
Mar-Aug
Jan-Jun
Jan-Jun
Feb-July
Jan-Jun
9,281
23,784
29,388
17,774
11,529
33,486
14,521
48,373
17,339
3,873
2,671
7,575
0.5 %
-1.8 %
1.7 %
6.7 %
0.2 %
0.4 %
5.6 %
5.4 %
0.8 %
1.1 %
8.2 %
9.6 %
5,823
9,313
13,732
11,35
7,333
7,372
25,054
10,886
1,948
4,705
-5.4 %
-2.7 %
-0.5 %
6.9 %
-2.4 %
7.2 %
3.2 %
0.7 %
10.4 %
14.1 %
2,291
5,651
4,527
2,872
1,662
5,111
1,511
7,344
1,763
341
174
1,073
32.6 %
-2.6 %
10.4 %
7.8 %
10.6 %
13.7 %
-19.1 %
8.5 %
-7.7 %
12.2 %
+4.9 %
2.6 %
1,285
4,427
3,085
1,855
1,013
3,19
1,276
5,469
1,184
154
80
663
18.3 %
-8.6 %
18.0 %
18.4 %
9.7 %
14.3 %
-4.1 %
3.7 %
-35.7 %
12.2 %
-13.6 %
-1.8 %
1.39
0.60
1.30
2.86
3.16
1.13
2.17
1.71
0.34
0.88
0.79
0.96
36.3 %
-3.2 %
36.8 %
18.2 %
10.1 %
16.1 %
13.6 %
2.4 %
-41.4 %
13.4 %
-30.6 %
5.5 %
Source:Accnture, Home and Personal Care, Food and Non Alcoholic Beverages, October 2013
20 | Attachments | Global Food&Beverages indicators
Russian Food&Beverages Indicators Russian Food&Beverages Indicators
Key Russian Food and Beverage market potential
Consumer prices and inflation rate (% changes vs. previous year)
F&B consumer spending growth in Russia
15
Consumer price inflation General inflation
12 % 9%
10
9%
9% 7%
5
Dairy products
7%
120 %
Source: KPMG и Nielsen, 2013
8%
100 %
Beverages
6% Per-capita consumption in Russia vs. EU, %
6% 4%
0
2009
2 010
2 011
2 01 2
80 %
Chocolate
60 %
Salty snacks
40 %
2 01 5 F
Coffee
20 %
Per capita consumer expenditures on food, beverages and tobacco (USD ‘000) 4 3,5 3,2
3,2
3,5
3,3
3 2,5 2 1,5 1 0,5 0
1,9
2,1
1,4
1,4
0,4
0,5
0,5
0,6
2009
2 010
2 011
2 01 2
0
6%
7%
8%
9%
10 %
11 %
2012-2015 CAGR of market in value terms (%)
3,6
0,7 %
Expected CAGR 2,8 10,7 % 2011-2015
Average EU level Russia Average BRIC level (excl. Russia) Source: Economist Intelligence Unit
0,8
11,0 %
2 01 5 F
21 | Attachments | Global Russian Food&Beverages Indicators
Source: KPMG и Nielsen, 2013
12%
Russian Food&Beverages Indicators Dairy market dynamics in volume terms (bln l) 6
Dairy market dynamics in value terms (RUB bln) 12 %
11
5
10 %
4
7
8%
7
6
3 2
6% 4%
1
4,1
4,4
4,5
5,4
2010
2 0 11
2012
2015F
0
22
500 400 300
11
200
2%
100
0%
0
60 %
15 % 10 %
205
249
290
400
2010
2 0 11
2012
2015F
5% 0
Dairy market Dairy market growth
Dairy market structure by product in volume terms
80 %
20 %
16
Dairy market Dairy market growth
100 %
25 %
19
Dairy market structure by product in value terms
13
15
22
19
100 %
40 %
80 %
28
32
60 %
20
17
40 %
20 %
65
0% 2012
66 2015F
22 | Attachments | Global Russian Food&Beverages Indicators
Yogurts and desserts Kefir Мilk
20 %
52
0% 2012
51 2015F
Yogurts and desserts Kefir Мilk Source: KPMG и Nielsen
Russian Food&Beverages Indicators Beverage market dynamics in volume terms (bln l) 13
8
Beverage market dynamics in value terms (RUB bl) 14 %
12 10
6
8
4 2
4,8
5,4
5,8
7,1
2010
2 0 11
2012
2015F
0
15
350
12 %
300
10 %
250
8%
200
6%
150
4%
100
2%
50
0%
0
12
10
164
190
215
290
2010
2 0 11
2012
2015F
Beverage market Beverage market growth
Beverage market Beverage market growth
Beverage market structure by product in volume terms
Beverage market structure by product in value terms
6 9
100 % 80 %
6 11
100 % 80 %
60 %
60 %
44
40 %
49
20 %
41
0% 2012
16 % 14 % 12 % 10 % 8% 6% 4% 2% 0
13
34 2015F
23 | Attachments | Global Russian Food&Beverages Indicators
Ice tea Кvass Carbinated soft drinks Juices
40 %
8 7
8 9
37
40
20 %
47
0% 2012
43 2015F
Ice tea Кvass Carbinated soft drinks Juices Source: KPMG и Nielsen
CoDRINK Financial Indicators CoDRINK Russia P&L (mln of Rubles) Year
Change 2012
2011
2010
2012
2011
Total net revenue
326 934,32
335 099,25
291 433,15
-1,52%
14,98 %
Operating expenditures
284 086,61
286 560,65
249 450,01
-0,86%
14,88 %
Other expenditures
-42 847,71
-48 538,60
-41 983,14
20,92%
12,66 %
Total operating profit
1 530,45
1 617,95
1 399,44
-5,41%
15,61 %
Total operating profit margin
13,91 %
14,48 %
14,41 %
-3,95%
0,55 %
24 | Attachments | CoDRINK Financial Indicators
Case created and published by Changellenge >>, Russian leading case study organization. www.changellenge.com info@changellenge.com vk.com/changellengeglobal facebook.com/changellenge Case ordered by Accenture www.accenture.com Š 2013