Kraft in Asia: Lessons From a Turnaround by Knowledge @ SMU, 15 March 2010


Kraft in Asia: Lessons From a Turnaround

by Knowledge@SMU, 15 March 2010

Kraft Foods Pradeep Pant risk-taking self awareness winning mindset

As a 34-year veteran of the fast moving consumer goods (FMCG) industry, Pradeep Pant, President of Kraft Foods Asia Pacific, can say quite convincingly that he knows the key to successful leadership.

The magic lies in a “winning mindset”: a trait that can make all the difference between making profits or suffering losses under trying business conditions. Pant, who spoke at a recent Wee Kim Wee Centre seminar at the Singapore Management University, said that it was this “winning mindset” that helped turnaround Kraft Foods’ Asia Pacific business.

Kraft Foods made the news recently when it launched a US$19.5 billion takeover of Cadbury plc, the British candy maker famous for its iconic purple-wrapped chocolates. This was barely three years after Kraft’s US$7 billion acquisition of Group Danone’s global packaged baked-goods business. Clearly, Kraft Foods is not a humble company merely selling cheese. Rather, it is one of the largest food manufacturers around.

On February 16th, the company reported that operating profit for the fourth quarter ended December 2009 nearly quadrupled to US$1.3 billion, on the back of a 3.2% increase in revenue to US$11 billion in the same period.

Today, Kraft Foods’ products can be found on the shelves of supermarkets and grocery shops in 160 countries. In its stable is a line up of 11 ‘billion-dollar brands’ like Nabisco, Oreo, Philadelphia Cream Cheese, Maxwell House, and of course, now Cadbury, as well as dozens other in the ‘hundred million brands’ category.

Naturally, within such a sprawling business organisation, it would be impossible for every cylinder to be firing at the same speed all the time. While emerging markets are a critical engine of growth for Kraft Foods today, the Asia Pacific division was struggling with low to flat growth between 2001 and 2007. However, around 2007 onwards, three major ‘change’ factors came together.

First, there was a global reorganisation led by Kraft Foods’ CEO, Irene Rosenfeld, to move decision-making closer to local consumers and customers. Next, Kraft Foods acquired the Danone biscuit portfolio. Finally, new leaders, like Pant, were brought in. Since 2008, operating profits have been growing at double digit rates – despite the recent economic downturn.

From a regional business unit with relatively sluggish top line growth, Kraft Foods Asia Pacific has since taken on the mantle of being the global company’s growth engine. The Asia Pacific business now boasts approximately 6,400 employees across 15 markets, 21 manufacturing plants in eight countries around the region, and eight research and development centres.

According to Pant, who took on the job in January 2008, what drove the turnaround were: a clear strategic focus where Kraft Asia can win, consumer insight-based innovation, a powerful integrated marketing initiative, aggressive in-market execution, and heavy investment in people.

But all these would not have worked without the willingness to get into the mindsets of “we will be leaders” and “we will win.”

Eyes on the Prize

To win, it is necessary to focus. In many organisations, the focus is on the core business. Focus means knowing what you want. But it is useless to know what you want if you cannot articulate it, for you will not be able to formulate a robust plan and steer your team or organisation towards yourFocus also means concentrating on one task at a time. Gillette, where Pant worked his way up over 20 years to become President for Asia Pacific, is one good example. When the operations underperformed in 1999, the company came up with a recovery plan. While many other companies might have rushed to react to changes in the market, Gillette stayed the course, tackling the issues one by one. This approach became the foundation of the organisation’s successful turnaround.

In a highly competitive marketplace, companies may feel compelled to be “everything to every customer,” and “doing everything everywhere,” says Pant. But to do well, it is better to stick to a clear strategic focus. He suggests that organisations ask themselves two questions: “What do I want?” and “What do I not want?”

Mastery Begins With Self

In order to win, certain attitudes have to be adopted. For example, to master the business environment, one must first be the master of oneself, Pant says. Start by being self-aware. Ask yourself: Who am I? What are my values? What are my weaknesses and how do I fix them?

The art of self-control is important as well. “If you can’t control your weaknesses, you can’t control other things,” Pant noted. Old ingrained habits will require time to break, so try instilling discipline in small doses, he advises. For example, if you want to start a morning exercise regimen, start by waking up on time everyday for the first week, before easing into the exercise. The trick to lasting changes, he said, is to do it in small steps.

Mastery over oneself also means being genuine and real. Many people often put on a front to impress others. However, the real self will show gradually. So, be yourself and let people see you genuinely for who you are. “Nobody, including me, can act well enough to fool people all the time,” he adds.

Seizing Opportunities

Pant, whose turf includes a diverse mix of markets with different characteristics and cultural nuances, encourages adaptability – so as to draw ideas and thoughts from different cultures. This, in turn, helps him to run the multinational corporation better.

Another route to winning, for Pant, is to think of opportunities in times of adversity. Citing the two Chinese characters that make up the word crisis, or wei ji, he notes that wei represents danger, whilst ji stands for opportunity. So these are two ways to look at a crisis.

During the global economic downturn last year, as most other companies cut back on spending and shelved expansion plans, Kraft Asia Pacific went the other way. It maintained its prices, its product quality and marketing spend. The company saw results very quickly, further confirming that the decision to stay the course was the right one.

Next, leaders need to realise that a winning mindset will do no good if there is no one to put the ideas into actual use. Unlike fixed assets, human assets need not be depreciated, says Pant. In fact, if there is an asset that appreciates all the time, it is people.

Pant’s advice for any company is to help every staff maximise his or her potential, and make winners out of every one of them. At Kraft Foods, it is the strong belief in people – the aggressive investment in people through development and training – that has played a key role in turning it around, he adds. Innovation and Risk-Taking

Winners never achieve success by staying put within their self-imposed boundaries. They need to be innovative; they need to take risks.

Innovation and risk-taking starts with listening to the customers’ needs, says Pant. One example is consumer research on Tang, a drink that is usually drunk cold in the U.S. In China, however, it is consumed as a hot drink. Oreo, one of the company’s best-selling cookies, was not well received in China until the less sweet version was launched. With this version, Oreo became the number one cookie in China. In contrast, Oreo sold in Indonesia is sweeter. “Ultimately, consumers are the bedrock of understanding the product,” says Pant.

With insights from customers or targeted audiences, Pant suggests delivering solutions in ways that are unique and exciting. One example he shared was from his Gillette days, when he gave salespersons silver recognition medals – not after they had achieved their targets, but before they set out to do so. He points out that the last thing someone wants to do is to return a silver medal because they didn’t deliver what was committed.

The task is to find out what makes people tick. If you do well, celebrate. “Reward yourself with a small celebration for small achievements, and a big celebration for big achievements,” says Pant. But more importantly, strike a happy balance between contributing, learning and having fun at work. After all, we spend the longest part of our waking life at work.

“So what is your idea of fun?” an audience member asked.

“Beating competition in the marketplace and seeing people grow,” he replied.

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~ by datorickywong on March 18, 2010.

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