cadbury milk chocolate

Kraft is targeting the removal of $675 million (£430 million) worth of costs annually, as it faces a mammoth SAP integration task following its £11.5 billion acquisition of Cadbury.

Changes to IT and back office operations will lead to part of the operational efficiency improvements, to be generated over two years, it is understood. Other factors may include process, manufacturing and supply chain improvements. The company expects integration to cost a total of $1.3 billion (£827 million).

A vast chunk of the IT integration is likely to focus on SAP, used by each of the two companies as their enterprise resource planning platform. A merger could involve the migration of large amounts of data onto Kraft’s SAP ERP system, followed by the centralisation of processes.

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.

Kraft 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.

Cadbury 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.

As Kraft today reported its profits for the quarter to 31 December had more than tripled to $710 million (£453 million), it told investors that “opportunities for significant synergies” with Cadbury had been “identified”. It did not give details on how these would be achieved.

Kraft today also vowed to invest in distribution, marketing and product development, aiming for the combined group to grow revenues by five percent over the “long term”.

Irene Rosenfeld, Kraft chief executive, said the new group will "remain focused on driving sustainable top-line growth, while delivering against our cost savings and synergy opportunities".

Trade unions have continued to raise concerns over what will happen to Cadbury staff. Kraft has not said how staff, including IT and back office employees, will be affected, apart from an announcement earlier this month that 400 factory jobs would be cut as it closed a factory at Keynsham. Those redundancies were originally set out by Cadbury in 2007.