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This report aims to critically appraise various internal and external factors which contributed to the success of Premier Food’s grocery division restructuring programme. Examples of effective change management disciplines are integrated throughout the project to achieve a successful business strategy. Although, no matter how effective and efficient you plan for change, risks are inevitable.
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The report aims to identify the key risks associated with the restructuring plan and identify the possible effects on human, physical and cultural resources. In the latter stages, the report will come to a close, highlighting the main points which the author believes has had an influence on the entire grocery divisions restructuring process.
Premier Foods has been established as the UK’s leading food manufacturer, specialising in many known consumer brands such as OXO, Quorn, Hovis, Batchelors and Branston Pickle.
It’s estimated that 99.4% of the UK population buy at least one Premier Food product each year and a total of 43 million people, eat a leading brand food product every two weeks.
Therefore, current turnover is estimated at £2.6 billion and the company currently employs 17,000 people at 60 manufacturing sites around the United Kingdom and Ireland.
Although, these figures would have been unrealistic without Premier Food’s £460 million acquisition of Campbell’s’ UK and Irish market share in August 2006. In March 2007, Premier Foods also captured RHM’s market share for £1.2 billion and therefore, turnover figures increased dramatically from £760 million to the current turnover figure of £2.6 billion.
In 2008, Premier foods had successfully undertaken a comprehensive restructuring programme, which was deemed extremely complex in the UK. The aim was to radically transform the Grocery Division, which would drive the business through lower costs and higher technical standards.
Premier Foods wished to implement the following key changes:
- The eradication of eight manufacturing sites between September 2007 and December 2008.
- Five core sites would increase the number of consumer brands manufactured. Capability and capacity are critical.
- The transfer of more than 1500 consumer brands and 2000 materials (136,700 tonnes).
- Capital Investment of £47 million, of which £19 million would need to be delivered in savings.
BUSINESS DEVELOPMENT PLAN – REASONS BEHIND THE CHANGES
External Market Pressures
‘The United Kingdom has one of the fastest growing food and drink markets in the world’ (UK Trade & Investment Services, 2009). The food and drink sector alone generates sales estimated at £70 billion and significant growth areas lie in value added products i.e. ready meals or Non-European recipes.
Recent studies had estimated the UK’s organic sector at £1.2 billion a year and the chilled food market a staggering £7 billion. Therefore this accounts for almost 60% of the overall European chilled food market.
However, in the East Midlands, food manufacturing is rapidly expanding. 15.1% of the UK’s food produce is manufactured here and over the forthcoming years, this figure is expected to increase by 40%.
Food companies such as NOM, an Austrian Diary Producer, have taken decisions with the help of the UK government (Trade and Investment) to expand into the UK’s rapidly expanding food markets. Therefore, it was imperative that Premier Foods assess the external market and plan for radical change.
Premier foods understood that the UK food market is highly competitive, ‘demanding consistent product quality and reliable supply whilst seeking more competitive pricing and innovative new products’ (Premier Foods, 2010).
The company had a policy to, ‘generate economies of scale to reduce production costs in order to support promotional activity, investment in building brand awareness with the consumer and new product development’ (Premier Foods, 2010).
Over the years, Premier Foods had marginalised its market position through organic and inorganic growth. Through this initiative, the company ‘has strengthened its competitive position by undertaking various initiatives in order to boost efficiencies and minimize costs’ (Just-Food, 2010).
During 2009, Premier Foods excelled it strategy of developing growing branded sales and expanding gross margin through the benefits of consumer scales and insights. The company recognised the need to continually develop this through 2010. In this period, the company wishes to deliver efficiency savings over and above the synergies already delivered in 2009.
The benefit strategies of 2009 were particularly absorbed by inflation (Input Costs) and by tougher consumer and trading environments. Therefore, this allowed promotional costs to rise and the company are to remain cautious in the 2010 shortfall.
Nevertheless, the company has the desire to challenge market growth rates and developed the strategy of identifying particular categories and brands they can push most. This new strategy splits consumer brands into, ‘Drive, Core and Defend.’ Premier Foods represent ‘Drive’ categories as the consumer brands which will inherit the most market investment i.e. Hartley’s, Quorn, Ambrosia etc.
However, Premier Foods agree that cooking sauces / accompaniments, desserts and cakes would have immediate success rates within the consumer market. A company statement had concluded that although the cake category was in decline over recent years, ‘lunchbox,’ ready-to-eat sweet snacks or treats are proving extremely popular.
In theory, taking advantage of this opportunity would eventually start a trend, where Premier Foods would target other ‘popular’ categories. In other words there is ample room for additional market growth. Bearing this in mind, the company is still confident in delivering a three year market strategy in demonstrating the company is moving in the right direction, ability to make profits and increases in the UK / Ireland market share.
Internal Pressures – Organisational Reform
By successfully developing an external market strategy plan, Premier Foods needed to radically transform the entire business, which would be a rationale for its success. The first phase was to conduct a review of all the manufacturing sites to identify their capabilities, infrastructure and skill base. This activity was conducted in the first three weeks by a small group of senior management.
The site review allowed senior management to develop viable options and allowed the initial steps towards a cost benefit analysis. Once satisfied with this, a presentation was developed for the companies’ board and an agreement was passed to take the initial work to a full business case.
‘A larger team, comprising representatives from each ‘in scope’ sites, was formed and a clear consensus regarding the optimum option was quickly reached’ (Wilkinson, 2010).
The agreement of the business case, allowed all main stakeholders to be involved within the development. The main intention was to secure a unanimous agreement on the final proposal. Fortunately, agreement was reached within six-weeks of the business case and provided a solid rationale for delivery of the restructuring programme.
However, part of the business case recommended the closure of six manufacturing sites in the United Kingdom and two in Ireland. There would be a period of twenty-one months, in which a mixture of consumer brands would be manufactured over five expanded sites.
By now, people including stakeholders, board directors, managers etc knew which consumer brands would move from one manufacturing site to another, the expected costs of the entire restructuring programme, target delivery points and detailing the benefits that would occur across the entire organisation.
‘The output of this work also demonstrated the overall level of benefits that could be achieved and provided a baseline for delivering the programme’ (Wilkinson, 2010).
Therefore, market strategy developments, extensive cost cutting exercises, combined with effective efficiency strategies developed a recipe for success.
BUSINESS STRATEGY PLAN
In July 2003, Premier Foods were initially floated on the London Stock Exchange with a business strategy of:
- Development within consumer focused brands.
- Development through effective consumer relations.
- Cost Reduction strategies and business simplification.
Parallel to this, there was spotlight within the UK and the desire to acquire ‘Great British’ brands. The integration of these, would rapidly contribute to further strategies based on scale. However, the main aim was to expand company competitiveness with other British food manufacturers, whilst still improving company returns to the shareholders.
Premier Foods anticipated that corporate responsibility is a strategic priority that should be parallel to the overall business objectives. The company ensured that responsible business practice should be a fundamental operation of the business and place in the core of the corporate responsibility strategy of, ‘doing the right thing.’
Premier Foods adopted a business strategy which analyses current issues and attitudes. This allows the company to anticipate any trends which could hamper the business. This business strategy has been untouched and still currently forms the central core of the companies’ aspirations.
Due to the rapid growth of the company, the individuals and the manufacturing sites involved in the restructuring programme had very different cultures and people who came from different work backgrounds. Therefore, there was different levels of understanding in both project and programme management processes.
Although, to implement an effective restructuring process, an effective change management strategy had to come into operation and to get an overview; there are five key principles that are extremely important: (Briggs, M., 1995)
- Individuals tend to react differently to change.
- Everyone has a desired need, which should be met.
- Change tends to involve a loss or reduction in something.
- Realistic targets and expectations.
- Fears need to be dealt with.
Bearing this in mind, Premier Foods had to be open and honest about the entire restructuring strategy. The company were ‘open’ and not too overoptimistic in theory. In other words, the company set realistic targets and deliverance dates.
Project Management Strategy
To improve how the company manages large or small scale projects, Premier Foods embarked on integrating a new project management process. Currently, there were various project management systems integrated across the entire organisation and the proposal was to have one standard system based upon Prince2.
‘Prompt,’ would be the system which Premier Foods integrated across the entire organisation and benefits in Prompt allowed Premier Foods to manage and initiate projects in each work stream. Work stream managers were responsible for this and would manage project teams, to complete any work as necessary.
Resource Management Strategy
To increase flexibility and reduce project delivery risk, interdependencies between specific work streams and projects were minimised. Time scales and achieving key delivery dates were crucial in this process. However, to support this, Premier foods ensured a structured organisational programme was in place and at the same time, avoided the utilisation of common resources.
On the other hand, the company sourced resources at the work stream level, through process of common procurement approach. This allowed work streams to progress at a constant level, whilst having the ability to maintain an overview of contract resource usage and ability to view potential competing priorities at an early stage.
Due to recent European legislations in place, there are pressures within industry to curb the amount of carbon dioxide produced in the manufacturing of consumer goods. ‘Premier Foods is committed to supporting the UK Government’s position on Climate Change and the Kyoto Protocol’ (Premier Foods, 2010).
The company has a ‘Five Star Environmental Award Scheme’ in structure, which was rolled out to all manufacturing sites in 2009. The scheme is a benchmark ensuring ‘energy usage, waste, water usage and carbon dioxide emissions are carefully monitored’ (Wilkinson, 2010).
Scheduling & Milestone Management Strategies
The original business case recommended a tight delivery timescale and was substantially dictated by the seasonality of transferring food categories. In other words, the transferring of a food line had a set delivery date. If the opportunity was missed then the company would have to wait to the next available opportunity i.e. desserts are more popular in the winter and therefore move production to the summer.
At different intervals during the project, there was the requirement to assess the restructuring programmes ability to deliver within the target timescales. Whilst towards completion of the programme, various groups of people needed to be coordinated around specific milestone dates. Therefore, Premier foods had to ensure a sufficient scheduling and milestone management programme was in operation.
Programme Assurance, Change Control and Scope Management Strategies
The scope of the restructuring programme was ‘controlled within overall programme approvals through the formal initiation of projects and associated funding in each work stream’ (Wilkinson, 2010).
Each element within the restructuring programme had strict parameters to adhere too and were closely monitored i.e. funding and timescale delivery. However, if parameter changes were necessary, agreement would have to be obtained through steering committees, by the change control process.
Information & Communication Strategies
Due to a large number of individuals being involved in the restructuring programme, an effective communication strategy was implemented to ensure information was circulated both internally and externally.
Therefore, to ensure employees fully understand the strategic approach, ‘Corporate Responsibility Road shows,’ were presented at all manufacturing sites to Senior Management teams. This ensured that they were aware of the long term sustainability goals and could effectively brief all employees about the planned changes in the company i.e. maintain involvement and commitment to employees whose job role were becoming redundant.
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Regular meetings with key external stakeholders ensured that the company ‘advised them on any major changes, ensured the company was on the front foot and most importantly, minimised any potential damage to corporate reputation from any foreseeable redundancies’ (Wilkinson, 2010).
Moving food production from one manufacturing site to another, impacts both the suppliers and customers. Therefore, both had to understand the changes which were being devised and reassured that supplies in a particular food category were managed effectively i.e. there was sufficient stock in the warehouses, while the transfer of a particular food line was being made.
Quality Management Strategy
Quality Consumer Brands
Although moving manufacturing lines from one site another is relatively a straightforward process, ensuring the ‘quality’ of the produce is critical. The company initiated a quality protocol which ensured that an individual product would move to a new location, meeting all necessary standards. Therefore, ensuring you protected the consumer experience was fundamental to the programme.
This operation was strictly controlled and managed centrally. This ensures that the steering committee could monitor the quality control process and highlight any problem areas.
Premier Food’s technical and commercial teams ensured that resources were utilised where required. Food tasting panels were utilised to ensured product matching and consumer testing in more severe cases. This ensured that the companies’ acquisitions of additional food brands were protected from other manufacturers.
Efficient Supply Chain Management
Peer review stage gate processes were introduced to ensure decisions were made appropriately. Individual project managers would check a list of criteria leading up to a ‘Go / No Go’ decision. Review teams were constituted from all areas of business, ensuring there specialist area was implemented to high standards.
Supply change management and independent business activities were amalgamated into one process, to ensure risks to the business and customer service levels were understood and managed appropriately.
Issue Management Strategy
Dealing effectively and efficiently with issues was seen as a competitive advantage for whole organisation. Individuals could identify any issues, at any point with the restructuring programme. Once identified, the responsible manager or line manager would deal with the issue. If required, an issue could be escalated to high level through steering committees for example.
Alignments between, ‘operational business, programme delivery and benefit achievement, demonstrated clear ownership and responsibility of the programme’ (Wilkinson, 2010).
Therefore, issue management procedures could be reduced, ‘as the result of effective communication forums and clear governance routes’ (Wilkinson, 2010). Therefore, the delivery of the restructuring programme within, ‘target timescales, benefits and customer service constraints demonstrates the effectiveness of this approach’ (Wilkinson, 2010).
Health and Safety Strategy
Premier Foods, employed 16,000 employees across 60 manufacturing sites and they recognise that ‘our employees are our single most valuable asset and we strive to be an employer of choice in areas which we operate’ (Premier Foods, 2010).
Health and safety was a critical aspect in the programme, ensuring a safer manufacturing environment and safety improvements within plant and machinery.
Strict guidelines were put in place and key initiatives were presented to line managers in workshops to ensure that risk assessment and risk management initiatives were enforced throughout the company.
Value Engineering Approach
The value engineering approach was utilised throughout project delivery dates, operational design and high safety food standards.
By scrutinising the entire project build i.e. capital costs, then positive decisions could be made. Likewise, a change control mechanism was in place to acquire a cycle of positive feedback. Therefore, changes could be made prior to management decisions.
Feedback from the value engineering approach was shared across the entire restructuring programme, in the ability to deliver efficiencies i.e. value for money.
Human & Physical Impacts
As quoted by the Boston Consulting Group (2010), Premier Food’s restructuring strategy was one of ‘the largest and most complex restructuring of food manufacturing in the UK.’ Risks are inevitable with a restructuring strategy the size of Premier Food’s and precautions need to be put in place to counteract any eventualities.
To begin, risks begin with the agreement of all the key stakeholders within the company. If by any means the stakeholders were unable to come to a unanimous decision, then the entire restructuring process could be in jeopardy. The key to its success would be to present an ‘excellent’ business case, identifying the key drivers and reasons behind the change.
Whenever there are redundancies, it can be a devastating blow to the surrounding area, local economy and families. ‘It may happen because a work place is closing down or because few employees are needed for work of a particular kind’ (Holland, et al, 2008).
In this instance, part of Premier Food’s restructuring programme involved closing eight manufacturing sites and distributing current food categories over five existing sites. Senior Management closed a site based upon a number of factors i.e. site throughput. The aim was to improve productivity, lower costs and increase profits.
Nevertheless, redundancies were inevitable at this point and the key was to maintain the companies’ reputation to avoid scrutiny.
‘A reputation of a company is its important and valuable asset. A positive one may bring many benefits to a company, when a negative one may significantly harm it’ (Westcott, 2005).
Although it was a devastating blow, the company would have to ensure all employees were treated in the best possible interests. Fortunately, the company offered generous redundancy packages and liaised with the local councils to ensure all redundant employees would have help getting back into employment.
Once the workforce has been restructured, logistics and the redistribution of resources are crucial. The overall business challenge was to redistribute;
‘1500 products, 2000 materials, build new facilities, transfer 51 manufacturing lines, put a 2.5 million pallet stock build in place to maintain customer supply and complete 1800 line trial activities’ (Premier Foods, 2010).
Besides this, the company needed to maintain both the company image and the customer service performance of a demanding business. Keeping the consumer supplied was at foremost importance, as there was the possibility of loosing contracts with some of Britain’s major brand stockists i.e. Tesco, ASDA, Sainsbury’s. As well as ensuring the survival of major cultural brands that have been produce for generations i.e. Hovis. Likewise, due to the rapid growth of the company, individuals and manufacturing sites that were affected by the restructuring programme had very different cultures.
‘Culture, is seen as a pattern of beliefs and expectation that are shared by an organisations members’ (Schwartz, et al, 1981). These factors tend to produce norms which, ‘powerfully shape the behaviour of individuals and groups in the organisation’ (Schwartz, et al, 1981). Culture, intends to concentrate upon the nature of these expectations.
Taking Premier Foods into context, the individuals involved have been told various incentives which are behind the grocery divisions restructuring process. Therefore, the company have the responsibility to deliver their business strategy and individuals are right to dispute whether company expectations are being met i.e. Do they promise what they wish to deliver in the short-term and long term future?
There is the risk that Premier Foods simply do not deliver and again, elements including corporate image could be affected.
Likewise, the individual and manufacturing sites involved, originated from different work backgrounds. There were different levels of understanding in both project and programme management processes. Although, it’s good when an organisation is built around people who have different ethics i.e. the ability to share ideas to improve an organisations structure, the problem is getting everyone to agree upon a particular thing and ensuring people work upon a standard level.
The key is to ensure everyone has good understanding of both principles, to ensure the restructuring programme is at minimum risk as possible. If not, then conflicts can arise (behavioural factors) and the restructuring programme could have major issues. Generally, it doesn’t work if one individual has a strong understanding in one area and a weak understanding in another.
Other Potential Risks
The organisational restructuring programme was also surrounded by other critical integration projects, which were being implemented at the same time. Some of these included the integration of key administrative functions i.e. Human Resources and Finance.
In the marketplace, the company itself faced soaring food cost inflations, as well as the impact of a major economic recession.
Human and physical resources were thinly spread and significantly challenged during this tense period. In other words, it was either ‘make’ or ‘break time’ and fortunately, the ‘gamble’ succeeded in the end.
CONCLUSIONS AND RECOMMENDATIONS
On a generic scale, the implementation of the entire restructuring programme was a complete success, taking the size and complexity of the programme into consideration. From research, the author identified the main critical elements for change.
To begin, the author believes that Premier Foods wishes to be the leading competitor in the UK food market, to compete with other competitors. Once this is established, there maybe future business development plans to expand and compete with the European Food Market or on an International Scale.
However, current infrastructure could not cope with future expansion and therefore, major internal reform was needed to improve the quality of food produced, the quantity of food produced and overall manufacturing costs.
Although there were harsh reforms in the workforce for example, this allowed the company to focus on long-term developments and improve profits. In the short-term, this allows major shareholders to gain a healthy return in investments and can continue to provide investments for the future.
Taking the following into contention, no major improvements are needed. The Premier Foods restructuring programme demonstrates high professionalism, within a large strategic scale. All project delivery points were delivered on time and within budget.
Although, a possible thought to consider is cultural differences. Current levels of project and programme management were at different levels between individuals and the manufacturing sites involved. Offering solutions that allow everyone to have the same level of knowledge may be advantageous. Nevertheless, it’s good when people have different ranges of knowledge and experience. This allows people to express their own interpretations, leading to new ideas.
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