Kraft bites off chunky SAP integration in Cadbury acquisition

Kraft and Cadbury are facing up to a massive SAP integration project, after Cadbury today agreed to be bought by the US food giant for £11.9 billion.

Following a lengthy courtship, Kraft finally won the approval of the Cadbury board by raising its takeover offer to 840 pence a share. For months Cadbury had flatly rejected Kraft’s lower offers, saying they undervalued it and that Cadbury was better off as a separate company.

Kraft, which operates in 72 countries and whose brands include Oreo biscuits and Philadelphia cheese, said the acquisition would create a “global confectionery leader”. Roger Carr, chief executive at Cadbury, insisted Kraft had made “commitments” to Cadbury’s staff and its brand heritage.

The companies said in a statement today that they would benefit from shared operations, in particular based around “Kraft Foods' global scope, scale and array of proprietary technologies and processes”. Kraft added there would also be a focus on “control of the supply chain”.

But exact details remain sketchy on the integration plans. In IT terms, both firms extensively use SAP enterprise resource planning, and this could mean Kraft will look to integrate the data of both companies onto one SAP system over time.

In recent years Kraft ran a large project to implement the SAP ERP 6.0 system, which SAP billed as one of its largest global ERP implementations. The project began in Europe and then was extended to Kraft's home market, the US.

In 2008, Kraft also began using SAP NetWeaver master data management to integrate information from a range of legacy systems into the new SAP ERP system. It worked with services firms IBM and EDS.

It has said in the past that SAP ERP would help it with standardising, optimising and automating processes, cutting operational costs in areas such as manufacturing, purchasing and the supply chain. By 2008, the ERP system was taking data from 11,000 Kraft staff, and was holding seven terabytes of information, linking in to 1,750 other applications. SAP is also the basis for shared services at the company.

Cadbury has a more chequered history with SAP. In 2007, before a demerger from drinks company Schweppes, Cadbury admitted that a troubled SAP implementation over the previous two years had held back its financial performance, contributing to a £12 million deficit on its balance sheet and leading in part to large job cuts.

The company is now running SAP ERP, linking in to the data of over 12,000 users. It also runs an SAP human resources platform. Separately, Cadbury outsources its datacentres to HP.

Questions remain over what will happen to Cadbury staff, including those in IT and the back office, according to trade unions that cited Kraft's recent cost cutting programmes. No details have been officially announced on Cadbury staff.

Jennie Formby, of trade union Unite, told the BBC today she was concerned about “the levels of debt” at Kraft, including that taken on to fund the deal. She added: "The sad truth is that when they have to pay down that debt, the soft option is jobs and conditions.”

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