Consumers in Russia have growing appetites for world-famous food and beverage brands, offering a ripe opportunity for The Kraft Heinz Company to boost sales and address new market segments.
To expand its presence in Russia, The Kraft Heinz Company purchased the Ivanovo Baby Food Company, and engaged IBM to bring the new acquisition onto its global SAP ERP platform.
One day savedon monthly closing
Slashestime, cost and scope for error in reporting to the parent company
EnablesThe Kraft Heinz Company to win market share and address new customer segments
Business challenge story
Tickling tiny taste-buds
Consumers in Russia have growing appetites for premium foods and beverages, including a soft spot for world-renowned brands. For The Kraft Heinz Company, this development presented a golden opportunity to win a larger slice of this flourishing market.
With its eyes on the prize, The Kraft Heinz Company acquired the Ivanovo Baby Food Company, which at the time produced baby food for the Russian market, primarily targeting cost-conscious consumers. The Kraft Heinz Company recognized that by offering the Ivanovo factory’s value products plus its own established premium brands, the company could cater to two major market segments.
By adding scale, the acquisition stood to grow The Kraft Heinz Company’s Russian infant foods business by over 30 percent. What’s more, the Ivanovo Baby Food Company already made a broad range of baby foods, enabling The Kraft Heinz Company to rapidly gain footholds in different market categories.
But an obstacle reared its head. The Kraft Heinz Company is a long-term user of SAP ERP applications, whereas the Ivanovo factory relied on a different ERP platform. Manually combining data from the two disparate platforms proved to be extremely challenging, making it difficult for the Russian business unit to hit internal deadlines for reporting to the parent company. Moreover, the heavy reliance on manual working left a broad scope for error.
The Kraft Heinz Company recognized that to unlock the full potential of its acquisition, it needed to onboard the company onto its global SAP ERP platform. The aim was to deploy The Kraft Heinz Company’s ‘keystone’ model of SAP ERP, which harmonizes processes across its global business and modernizes functions such as purchasing, manufacturing, logistics, quality management, sales, distribution, finance, and supply chain. For help with this complex mission, The Kraft Heinz Company engaged IBM Services.
Eugene Lobanov, GBS Russia Migration Lead at The Kraft Heinz Company, explains: “Ivanovo was the first acquisition made after Kraft and Heinz merged, and we were keen to showcase the growth opportunity of our new company by completing a rapid, smooth integration. We chose IBM because they are one of our trusted strategic partners, and because IBM offers strong skills and expertise in SAP.”
IBM worked closely on the implementation with The Kraft Heinz Company’s Center of Excellence, which manages SAP deployments across the company’s global business units. Along the way, IBM and The Kraft Heinz Company had to overcome several challenges.
Lyudmila Zhdanova, Finance Controller at The Kraft Heinz Company, elaborates: “The Kraft Heinz Company’s subsidiaries in Russia focus either on selling or production, whereas historically, Ivanovo had managed both sides of the coin. To incorporate the Ivanovo factory into our broader operations, we decided to transform it into a production company and integrate its output into our distribution operations. To accompany this new strategic direction, we needed to transform the way the company worked, so we invested significantly in change management. Furthermore, to ensure that the Ivanovo business unit could meet our corporate standards, we needed to enforce rigorous process controls across the business and increase visibility.”
Eugene Lobanov continues: “The data migration and master data presented further obstacles. First, we cleansed the master data from Ivanovo’s legacy system to boost accuracy, and modified it to suit the company’s new purpose as a production outfit. Then, the IBM team studied our keystone SAP model, so that they could transfer the legacy data to SAP in the correct template.
“The IBM team provided excellent support in cleaning up our master data and migrating it over to the new system on time. This element of the project went particularly well, and we encountered no problems with master data following the migration.
“With the support of IBM, we completed the complex SAP ERP deployment at Ivanovo very smoothly, and within a tight deadline. IBM brought to the table the right skills and know-how to ensure the project’s success. People from IBM and The Kraft Heinz Company worked well together, and since the deployment we have had no change requests or inaccuracies in financial reports.”
Rita Fischer, Vice President of Global Applications at The Kraft Heinz Company, remarks: “I am pleased to report that thanks to the collaboration between IBM and The Kraft Heinz Company, we have finished the implementation of the SAP global templates at the Ivanovo factory. The project was successfully completed within extremely tight deadlines.”
Serving up insight
The Ivanovo business unit is already reaping the fruits of the SAP ERP implementation, starting with dramatically simplified reporting to the parent company.
Lyudmila Zhdanova says: “In the past, monthly closing was challenging, because we had to manually combine information from Ivanovo with SAP data from the other Russian entities before we could report to the parent company. The process meant that we had to start it before month-end in order to hit our internal reporting deadlines. Now that everyone is using SAP, we can generate the same reports in much less time, saving a day in monthly closing.”
Ivanovo’s legacy ERP platform provided only limited support for functions such as logistics and production, forcing staff in these areas to bridge the gaps in functionality via manual workarounds. Because SAP provides better support, employees in these areas have been able to establish more robust ways of working. Because data is held in SAP, rather than in spreadsheets, the company has a much clearer, more accurate view of factors such as inventory levels and manufacturing costs.
Lyudmila Zhdanova adds: “Previously, staff at the Ivanovo factory had to calculate manufacturing costs manually, due to the limitations of the legacy ERP platform. Now, they can perform the calculations automatically in SAP, saving time and reducing the scope for error.
“From a compliance perspective, we have real peace of mind in the knowledge that SAP gives us a clear track record of transactions. We can also satisfy any auditors’ requirements for information quickly and easily.”
Following the move to SAP, The Kraft Heinz Company has begun manufacturing a broader range of products at the Ivanovo factory, catering to both high-end and cost-conscious consumers. Through this strategy, The Kraft Heinz Company hopes to win a bigger slice of the Russian market.
Eugene Lobanov comments: “We see this as a real transformation of our business. By standardizing processes, we have boosted visibility, simplified compliance, and raised the productivity of the Ivanovo factory, so that it provides better support to The Kraft Heinz Company.”
Lyudmila Zhdanova concludes: “Thanks to the strong support from IBM, we have embedded SAP ERP across all facets of our Russian business, helping us to grow sales in this exciting market.”
About The Kraft Heinz Company
The Kraft Heinz Company is the world’s fifth largest food and beverage enterprise, operating eight billion-dollar brands and generating USD 26.5 billion in net sales in 2016.
- GBS AD&I - EA - SAP
- IBM Global Business Services
- IBM-SAP Alliance