On April 15, 2004 we have changed our name to Capgemini.

To help you achieve measurably faster, better and more sustainable results we have taken this opportunity to formalize our core strengths into what we call the Collaborative Business Experience. Our clients tell us that what makes Capgemini different is the unique, collaborative way in which we help them take advantage of opportunities and solve their problems. Collaboration has long been a recognized cornerstone of our approach to business and is part of our DNA. We believe that success and collaboration go hand in hand and we have been a pioneer in developing collaborative practices such as our innovative Accelerated Solutions Environment (ASE), which helps companies create rich strategic and technology solutions in record time. Why do we place so much emphasis on collaboration? We believe that collaboration is the business imperative of our time. For a decision to be both relevant and effective in todays complex and unpredictable environment, few companies can succeed alone. In our work with thousands of the worlds best companies we have found that there are four key elements to successful collaboration: Targeting Value, Mitigating Risk, Optimizing Capabilities and Aligning the Organization. However, Capgeminis Collaborative Business Experience is not a one-size-fits-all approach. The more complex the challenge and the situation, the more collaboration is required. We adapt the level of collaboration based on the nature of your needs and complexity.

The document you have downloaded, which refers to Cap Gemini Ernst & Young, was issued prior to our name change. It has not been modified to refer to Capgemini since it is part of our archives.

The Beverage Industry: Thriving in a Volatile Environment

Effective, focused solutions in CRM, supply chain and distribution management will be the keys to success in todays and tomorrows dynamic and challenging beverage world.
Widespread global consolidationa flood of new productsprice hikesnew, more restrictive laws and regulationsincreasing consumer segmentation. Change in a multitude of forms has come fast and furiously to the beverage business in recent years. Surviving and thriving in this volatile environment requires that beverage companies employ focused, effective solutions in areas such as CRM, supply chain management and distribution management. The growing complexity of the industry was summed up by Karel Vuursteen, member of the Management Board of Heineken Holding N.V. and former chair1

man of Heineken N.V., when asked for his view on the most important developments facing manufacturers in the next five years: Product safety and consumer trust. Increasing concentration on the retail and manufacturer level and the growing assertiveness of consumers. Linked to this will be the occurrence of increasing individualisation. This growth in individualisation is going to prompt mass customisation and a reversal of the supply chain to a state that is increasingly demand driven. There will also be the inevitable effect on the product offering and the nature of communication with the consumer.1

Interview with Karel Vuursteen, State of the Art in Food: The Changing Face of the Worldwide Food Industry, published by Cap Gemini Ernst & Young and Reed Elsevier, 2002.

Leading the list of issues affecting the beverage industry is the rapid market concentration that has taken place in the past few years. The trend has been occurring around the globe in all segments of the business beer, wine and spirits, and non-alcoholic beverages such as soft drinks, bottled water and juices with large companies acquiring smaller local or regional firms, as well as mergers between large companies. Consolidation has been particularly pronounced in the beer category, with recent examples including Adolph Coors acquisition of the Carling business of Bass Brewers in the U.K. from Interbrew S.A.; South African Breweries purchase of Miller Brewing; and the acquisitions by Interbrew of Labatt Brewing and Beck & Co. Driving the consolidation are the large economies of scale that can be gained in production, distribution and marketing. Manufacturers can move to regional supply chain optimisation, share distributors and enhance their product range. Concentration is expected to continue in the near future, although it may be stymied somewhat as a result of the recent European Commission ruling limiting the market share of a single company to no more than 30 percent in any one country in certain industries. In some instances, however, major players such as Heineken, Interbrew and Carlsberg currently hold market shares greater than this amount.

While the ruling will exempt pre-existing situations, future growth will need to come organically rather than through acquisitions. Other more restrictive regulations in some parts of the world have also impacted the beverage industry. For instance, a 2001 EU ruling allows for only one-year contracts between pub chains and manufacturers, compared with previous contracts that could be set at five years. This change will likely impact areas such as category management, product assortment, cost of sales and relationship management. New products, packaging and segments particularly in categories such as soft drinks, bottled water, energy drinks and fruity alcoholic beverages have also contributed to the increasing complexity. Thousands of new items are introduced each year as companies seek to gain competitive advantage and drive top-line growth, yet the success rate typically remains quite low. Competitive pressures, increasingly demanding consumers and shortened product lifecycles will likely continue to push up the number of product introductions. An additional factor comes in the form of changing consumer trends and lifestyles. As a result of their increasingly complex, fast-paced lifestyles, consumers no longer fit neatly into marketing segments, but are instaviduals who jump between many

segments during the week, and even during the course of the day. This new environment makes long-accepted marketing techniques obsolete, leaving many executives struggling to understand the new lifestyle needs of consumers in order to remain relevant in the marketplace. Couple this overall trend with declining alcohol consumption in some markets, which has been fuelled in part by price increases, and its easy to see the impact on the beverage industry. These changing dynamics are accentuated in a business environment thats characterised by economic uncertainty and volatility, requiring companies to rethink their current business strategies in an effort to become increasingly adaptable and flexible. This maelstrom of change has resulted in significant challenges for beverage companies in five primary areas: 1. Marketing/Product Innovation: Brand management, marketing program management, trade promotion management and new product development are vital issues for beverage companies. Its critical that companies identify new, context-driven alternatives for innovation and differentiation with their products and services. While the role played by a products features and functions (or content) should not be overlooked, Cap Gemini Ernst & Youngs extensive global research with more than 16,000 consumers found that consumers place

point of view

thriving in volatility

greater emphasis on the context surrounding commercial offerings (that is, the way in which a business delivers its product or service). 2. Enterprise Management: The increasing complexity of the beverage business and the changing demands and needs of consumers require that companies manage the customer relationship more closely, using real-time customer analysis, while minimising the overall enterprise costs. Enterprise issues facing companies include financial consolidation, profitability and contribution analysis, dynamic business planning, product costing and activity-based costing (ABC), and data warehousing. 3. Customer Relationship Management (CRM): The CRM challenge facing beverage companies is to shift from an internal focus to a consumer focus, understanding that profitability is driven by consumer behaviour. Areas of concern include contract management, call centres (telesales, teleservice and e-business) and mobile sales and service (key account management, presold order taking, merchandising and equipment service). Additional focus areas consist of rentals, full-service vending (including equipment management and fulfilment), customer vendor-managed inventory, rebate management and commissions management.

4. Supply Chain Management: Economic pressure and demands for efficiency are forcing companies to reduce their supply chain network costs while still meeting service expectations. This environment means that beverage companies must focus on network optimisation (supply and distribution networks), production planning and execution (including subcontracting), production vendor-managed inventory, excise duties, and empties planning and procurement. Supply chain challenges include reducing out-of-stocks; reducing inventory levels; and improving speed and certainty of supply. Its also critical that companies offer the consumer the best level of service; improve flexibility in order to adapt quickly to market changes; and gain greater visibility into the supply chain. 5. Distribution Management: Regulatory issues and consolidation are presenting distribution challenges for beverage companies. The key to success is to gain control over the route to the consumer, but at the same time reduce distribution costs. Crucial issues include the wide variety of distribution scenarios (large customer deliveries and returns, plantto-plant, vendor backhauls and pickups, and direct store delivery) and returns and empties.

Solutions for Success

To address these issues and improve business performance, its essential that a beverage company establish a solution framework that consists of a number of measures and levers to help meet their strategic objectives. If, for example, a beverage firms primary objective is to increase sales, customer retention and share of wallet, focus would be placed on improving enterprise management, marketing and innovation, and CRM. Enterprise management initiatives would centre around levers such as financial consolidation and data warehousing. Marketing and product development drivers would include effective market research, value-based pricing and improved time-to-market. CRM-related efforts would focus on areas such as improved contract management and efficient customer call management. By contrast, if the primary objective is to improve logistics, the emphasis should be on distribution and supply chain management. Distribution management levers include reducing transportation costs and improving direct store delivery (DSD). Supply chain management initiatives would centre around improving the reverse logistics process, developing an effective order tracking system and reducing stock levels.

Its critical that beverage companies identify new, context-driven alternatives for innovation and differentiation with their products and services.

An effective CRM approach should focus on new ways to increase the value of current and future customer relationships, based on a companys prioritisation of customer-value platforms such as segmentation, collaboration, alignment and customer experience management.

Of the five primary areas, three CRM, supply chain and distribution represent the most significant challenges for beverage companies today. However, if these issues are addressed with a focussed approach and strong solutions, they also offer the greatest areas of opportunity to reduce costs, build sales and gain greater efficiencies. Lets consider these three areas more closely.
CRM: Getting in Touch with the New Consumer

Cap Gemini Ernst & Youngs CRM approach uses our proprietary lens of Consumer RelevancySM to truly understand a beverage companys customer relationships. The process generally begins with a 360-degree analysis of a companys actual market position. Using that analysis, we help define the optimal consumer value proposition, based on the attributes of access, experience, price, product and service. From there, an effective CRM approach should focus on new ways to increase the value of current and future customer relationships, based on a companys prioritisation of customer-value platforms such as segmentation, collaboration, alignment and customer experience management. The result is a customer relationship strategy that optimises current and prospective relationships by assessing and maximising lifetime value potential. A holistic CRM program in the beverage industry should include a variety of tools and solutions. Analytical CRM, for example, allows a company to understand who its customers/prospects are and establish their likely preferences and behaviour; establish the value of a customer to support the companys profitable growth; and understand and optimise the structure of its current customer base. Another CRM tool available to beverage companies is the Customer Interaction Centre (CIC). A CIC provides data such as customer information, customer history, call status, a reminder script and service request. A Customer Interaction Centre directly facilitates customer services and reduces transaction costs, resulting in: Improved efficiency by linking CIC processing with a common set of real-time customer and business data for sales, services and marketing. One face to the customer. Reduced agent training requirements due to an intuitive user interface tailored to the specific needs of different user communities. The ability to address specific business needs using a customisable framework.

SAP Beverages: A Sparkling Solution

The complexity and volatility of the beverage industry demand specific solutions designed to meet the inherent challenges. SAP Beverages addresses these challenges by combining a leading ERP backbone with full e-commerce functionality to span the relevant business processes of the beverage industry. Cap Gemini Ernst & Young supported the development of the initial release of SAP Beverages. SAP Beverages offers an integrated solution to manage the entire supply chain in the beverage industry from small enterprises to global corporations and addresses many of the industrys hot buttons: Telesales Order management Rebate/bonus agreements Contract management Direct store delivery Empties Sales returns Excise duties Rentals Loading agenda/container logistics Bev03, DSD with mobile devices

Todays global consumer is more in control than ever. If a company cant meet or even exceed that customers expectations, someone else will. As a result, beverage companies must go to the next level of customer relationship management. This means developing new selling strategies geared to specific, segmented customer groups. It also means customising the buying experience wherever possible and carefully targeting new products and services. This environment demands that companies take a holistic approach to CRM with a strong focus on the customer experience. Emphasis should be placed on knowledge management in the form of customer and channel understanding, and on performance management through scorecards focussing on customer/channel profit, customer/channel processes and organisation. The knowledge management component should include areas such as customer segmentation and opportunity analysis and reporting, which are then factored into the go-to-market strategic planning process. In the area of performance management, attention should be directed to analysis and reporting regarding sales, retail objective, and category management and trade marketing effectiveness. The process should be taken through the full consumer products value chain, ultimately impacting a companys retail operational planning for areas such as trade coverage, brand coverage, cycle and route management.

CGE&Y is the first global partner certified by SAP to deliver SAP Beverages and was selected because of our: Extensive experience working with clients such as Coca-Cola, Heineken and Perrier-Vittel. Active role in testing early releases of SAP Beverages and supplying input for future developments. Creation of an SAP Beverages Best Practice System, which supports 16 typical beverage business processes across all functional areas.

point of view

thriving in volatility

Supply Chain Management: Streamlining the System

Beverage supply chains are complicated by their many-to-many format, which results in high costs, lack of control, low visibility and variable performance. This complexity makes supply chain planning a challenge, with issues including the sales and distribution process, market analysis, demand and planning performance, and significant seasonal and promotional impact. To tackle these challenges, beverage companies must reduce complexity, foster collaboration between business partners and create an adaptive enterprise. Effective supply chain network modelling, such as that provided by Cap Gemini Ernst & Young for its clients, establishes a framework within which a beverage companys supply chain can be streamlined and made more adaptive to market conditions. This method addresses beverage supply chain management processes including: Demand planning: forecasting of finished goods, forecasting of empties, planned empties returns, promotions and seasonal effects. Supply network planning: Match demand with supply network (i.e., network capacity plus planned stock plus service levels). Production order/distribution of scheduling. Transportation planning/vehicle scheduling: Route optimisation and vehicle capacity optimisation.

Creating a new, adaptive supply chain is essential today, when companies are competing in a volatile economic environment and are finding it increasingly difficult to forecast the future performance of their business or marketplace. Consider the example of a global beverage company whose fountain division faced the challenge of sustaining long-term profit. Through its partnership with Cap Gemini Ernst & Young, the company established the infrastructure, content and applications to create a self-service Internet portal for its customers, offering the potential for increased revenue, reduced costs and increased productivity. The primary enablers of an adaptive supply chain are lean and flexible operations, end-to-end visibility of supply and demand, collaboration, event-based management and integrated technology. Adaptive supply chains also help a beverage company to link order management with planning and forecasting and develop separate operations for customer segmentation. In addition, this approach enables a beverage company to become an adaptive enterprise, in which its key processes and technology can gauge and respond quickly to market changes. An adaptive enterprise requires a new mindset and a new approach to technology execution. Astute companies are shifting to adaptive business models that continually adjust to real-time conditions and allow them to use volatility to their advantage.

Creating a new, adaptive supply chain is essential today, when companies are competing in a volatile economic environment and are finding it increasingly difficult to forecast the future performance of their business or marketplace.

Driving the beverage industry consolidation are the large economies of scale that can be gained in production, distribution and marketing.

Distribution Management: Moving Product From Here to There

For a beverage item to get from the manufacturer to the end consumer it must move through an intricate distribution network. Numerous channels are involved, including foreign distributors/ wholesalers in the case of export trade, retailer warehouses, distributors/wholesalers or manufacturers own regional depots, depending on whether the product is heading for the on-trade restaurant/pub sector or for the off-trade retail market. This results in complex channel management, multiple intercompany relationships and high distribution costs. Key to more effective distribution management is understanding the different characteristics, best practices and technology leverage areas of the various beverage channels (see chart below). The retail channel, for example, is characterised by factors such as large volumes, a limited number of products and electronic ordering and invoicing. Best practices include efficient consumer response (ECR), continuous replenishment (CRP) and vendormanaged inventory (VMI). Technology leverage areas include electronic data interchange (EDI), automated store ordering, electronic point-of-sale and collaborative planning.

By contrast, the export channel is defined by factors like export documents, a large SKU count, high transportation costs and container shipments. Best practices in the channel include demand/forecasting, container logistics and supply chain management, and technology leverage areas consist of intranet sales, SAP Beverages and advanced planning systems (APS)/demand planning. Among the tools that can be used by a beverage company to improve efficiency in its distribution network is direct store delivery. Using DSD from SAP Beverages, order entry can be conducted through inbound or outbound telesales, by Internet sales, by sales representatives with a handheld, or by the truck driver, who can enter the order into a handheld and deliver immediately. For pre-sold orders or truck sales, the driver can issue the sales documents and collect returns and payments with an off-line mobile device. The DSD approach allows beverage companies to improve efficiency and customer service, accelerate administrative processes, reduce costs and provide a single integrated solution to support the business.

Beverages: A Multi-Channel Distribution Network

CHANNEL
Retail

CHARACTERISTICS
Large volumes Limited number of products Standardisation Electronic ordering Pricing agreements Electronic invoicing High number of SKUs Sales office/agents Electronic intracompany ordering Export documents Fixed shipping dates High transportation costs Container shipments Limited number of customers Fax/mail ordering Indirect rebates Sales rep

BEST PRACTICES
Efficient consumer response (ECR) Continuous replenishment (CRP) Vendor-managed inventory (VMI)

TECHNOLOGY LEVERAGE AREAS

Electronic data interchange (EDI) Automated store ordering Electronic point-of-sale (EPOS) Collaborative planning (Advanced planning system [APS] tools) Intranet sales SAP Beverages Container logistics APS (Demand planning)

Export

Demand/forecasting Container logistics Supply chain management Tax structures Commissionaire Contract manufacturing Limited risk distributor (LRP) Centralisation Wider product range Call centres Back-office efficiencies

Distributor/ Wholesaler

SAP Beverages Rebate (Indirect) Pendulum list CRM Mobile sales Analytical CRM SAP Beverages DSD/mobile solutions Telesales Vending machines Customer Interaction Centres Analytical CRM APS (Supply network planning)

Own Depots

Direct delivery High number of small orders Large number of customers (bars/restaurants/small shops) Truck sales Cash payers Telesales

Direct store delivery (DSD) Handheld solutions Call centres Customer segmentation Customer analysis Complaint processing

Key to more effective distribution management is understanding the characteristics, best practices and technology leverage areas of the various beverage channels.

The Accelerated Solutions Environment (ASE) is a creative, iterative process that results in productive solutions tailored to a particular beverage companys own strategy. Most of all, the ASE methodology is intent on driving speed to consensus, resulting in an effective working plan developed in a compressed time frame. Using radically different methods in this unique environment, companies are propelled past decision-making through solution design and into implementation.

A Fast and Focussed Approach

Whether a beverage company is facing challenges in the area of CRM, supply chain management, distribution management or all of the above, Cap Gemini Ernst & Young recommends taking an end-to-end approach to operationalising the business strategy using a model called Customer-Driven TransformationSM (CDT). The four-phase CDT methodology (see accompanying chart) rapidly identifies mission-critical business capabilities, effectively channels IT expenditures and implements operational improvements, resulting in better alignment of a companys business operations and IT applications with its core strategy. This process allows companies to determine whether they are spending money on areas that dont support their core business strategy or are overspending on areas that do not add to their point of differentiation. CDT can help a beverage company perform better against financial expectations, boost profitability and strengthen its competitive position in the marketplace.

In the case of CRM, for example, operationalising the strategy using CustomerDriven Transformation requires a careful examination of a companys existing CRM software to determine whether the right functionality such as data gathering and ensuring that the data is provided at the point of sale is present to enable that business to deliver on its strategy. Consideration also would be given to whether there is uniformity in how the CRM information is being used by sales, marketing and others throughout the organisation. To achieve a Customer-Driven Transformation companies must take a cross-functional approach and move to solution quickly. One method that Cap Gemini Ernst & Young has used to accomplish this is our unique Accelerated Solutions Environment (ASE). In the ASE setting a cross-functional client and consulting team incorporating operations, technology, supply chain, marketing, procurement and other key functions drives

out mission-critical capabilities in an intensive, highly collaborative, fully facilitated setting. The process is carried out in the context of technologys art of the possible that is, the ability of technology to enable strategy and business processes, as well as operational improvements. Customer-Driven Transformation conducted in the ASE setting provides a filter through which a beverage company can examine and evaluate its families of business operations and IT applications and determine which are essential, which should be revamped or improved and which are not vital to the corporate strategy. The ASE is a creative, iterative process that results in productive solutions tailored to a particular beverage companys own strategy. Most of all, the ASE methodology is intent on driving speed to consensus, resulting in an effective working plan developed in a compressed time frame. Using radically different methods in this unique environment, companies are propelled past decisionmaking through solution design and into implementation.

Customer-Driven Transformation: An End-to-End Approach

PHASE I Understand the Current Strategy PHASE II Build/Refine the Strategy
Technology Art of the Possible Beverage Strategy (Alignment) Strategy Vision Principles Requirements

PHASE III Design the Operating Model

IT Architectural Blueprint

PHASE IV Plan the Journey

Strategy Options Imperatives Value Proposition(s)

Required Strategic Capabilities

ASE

Gap Analysis Quick Hits Long-Range Opportunities

Business Case Priorities Costs Benefits

Implementation Roadmap
Projects/schedules Investments/ resources

Business Process Implications

Process and Organisation Blueprint

Quick Hits

Whether a beverage company is facing challenges in the area of CRM, supply chain management, distribution management or all of the above, Cap Gemini Ernst & Young recommends taking an end-to-end approach to operationalising the business strategy using a model called Customer-Driven TransformationSM (CDT). The four-phase CDT methodology rapidly identifies mission-critical business capabilities, effectively channels IT expenditures and implements operational improvements, resulting in better alignment of a companys business operations and IT applications with its core strategy.

Understanding the Beverage Industry

Experience counts in the beverage industry, where complex and unique challenges require specialised knowledge and expertise. Did you know that Cap Gemini Ernst & Young Has a global beverage solution team with a deep understanding of the industry. Has worked with more than 50 of the worlds largest beverage manufacturers, including breweries, wine and spirits companies, non-alcoholic beverage companies and distributors. Has in-depth knowledge and understanding of the SAP approach to the beverage industry and has implemented SAP in more than 30 beverage companies around the world. Employs more than 1,000 consultants with beverage-industry-specific experience in SAP implementation, procurement, e-strategy, supply chain management, merger integration, market research and shared services. Is currently working with five beverage clients to implement SAP Beverages, the first fully integrated ERP solution targeted at the beverage industry. Has developed its own SAP Beverages detailed training course.

The Bottom Line for Beverages

About Cap Gemini Ernst & Young

Disruptive change and complexity have become permanent facts of life in the beverage industry. Expectations are that consolidation will continue, consumers will constantly evolve, and the supply chain and distribution network will remain complex. These stark facts require beverage industry leaders to change their mindsets, redefine management practices and refine organisational principles to meet the challenges of a volatile business. This may sound overwhelming, but in fact it is the secret to continued success. Beverage companies with the willingness to employ focussed, effective solutions in areas such as CRM, supply chain management and distribution management have an opportunity to improve their performance and thrive in the dynamic and challenging beverage world.

The Cap Gemini Ernst & Young Group is one of the largest management and IT consulting organisations in the world. The company offers management and IT consulting services, systems integration, and technology development, design and outsourcing capabilities on a global scale to help businesses continue to implement growth strategies and leverage technology. Early 2002, the organisation employed more than 56,500 people worldwide and reported 2001 global revenues of more than 8.4 billion euros. Cap Gemini Ernst & Young (CGE&Y) has one of the largest global practices focused on helping consumer products, retail and distribution companies transform their businesses by driving revenue, margin and shareholder value while helping them adapt to market volatility. CGE&Ys global Products, Retail and Distribution practice has thousands of practitioners helping clients in more than 30 countries. To learn more, click on industries at www.cgey.com.

CAP GEMINI ERNST & YOUNG and related marks are service marks of Cap Gemini Ernst & Young. All other trademarks are the property of their respective owners. 8

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