KRAFT FOODS INC. in FRANCE

1. KRAFT FOODS INC.in FRANCE HUMAN RESOURCES Prof. Michael Segalla Best in France Project 2004 • Group ES1-B • Abdulrahman Alrefai • Igor Babichev • Juan Cortes-Funes • Thomas Coudry

2. OVERVIEW • Introduction • Kraft Foods Inc. • Global Organizational Structure • Kraft Foods, France • Brief History • Products • Why France is an important location • Company Values • French vs. American Values • What the Company does to instill its values in the French unit. • Constraints in France • Adaptation to France • Recruitment and Selection • Compensation • Management Development and Workforce Planning • Job Design • Key Cost of Operating in France • Advice Note: Words in inverted comas are the quotes of interviewees

3. INTRODUCTION • Kraft Foods France is a branch of Kraft Foods Inc, world #2 in the food and drinks industry • Kraft Foods France is a leader on the coffee and chocolate markets with a portfolio of prestigious and complimentary brands • Head office in France: 13, avenue Morane Saulnier, 78942 Vélizy-Villacoublay • Manufacturing units in Havre and Strasbourg

4. KRAFT FOODS INC. • Kraft Foods is a global leader in branded foods and beverages with 2003 net revenues of more than $31 billion • Built on more than 100 years of quality and innovation, Kraft has grown from modest beginnings to become the largest food and beverage company headquartered in North America and second largest in the world, marketing many popular brands in more than 150 countries • Since 2000 the company is a part of Altria Group together with Philip Morris

5. KRAFT FOODS INC. Company’s vision • Helping people around the world eat and live better Employees • More than 100,000 employees operating in 68 countries worldwide Facilities • Worldwide headquarters located in Northfield, IL. • Five key research & development centers in: • Banbury, UK; • East Hanover, NJ; • Glenview, IL; • Munich, Germany; • Tarrytown, NY. • 197 manufacturing facilities worldwide (end of 2003)

6. KRAFT FOODS INC. Kraft Foods Inc. Kraft North America Commercial Kraft International Commercial US Beverages & Grocery Western Europe Kraft Foods France US Snacks West Central Europe US Cheese & Dairy Central & Eastern Europe, Middle East & Africa US Convenient Meals Latin America Other Divisions Asia Pacific Global Organizational Structure

7. KRAFT FOODS INC. • Company structure encourages Best of Global, Best of Local • To achieve a synergy of a global company Kraft Foods Inc. centralized a number of global functions. Kraft's eight global functions are strongly aligned and linked to the Global Marketing & Category Development group and the two commercial units. The functions are centers for excellence, with responsibility for identifying and sharing best practices and using their global scale to best advantage: • Global Supply Chain • Global Strategy & Business Development • Global Technology & Quality • Global Finance • Global Human Resources • Global Law • Global Information Systems • Global Corporate Affairs • Kraft Foods Inc. gave an autonomy to county based units in some local functions: • Local Marketing Execution • Local Sales • Local Supply Chain • Local Human Resources • Local Law

8. KRAFT FOODS, FRANCE- BRIEF HISTORY • The history of Kraft Foods is marked by heritage of its famous brands, most of which originate from Switzerland, Belgium and Germany 1963: First time the group appears in France under the name of General Foods Corporation. 1985: Philip Morris buys General Foods Corp. 1988: Philip Morris buys Kraft Inc. 1989: Kraft General Foods is created. 1990: Philip Morris buys Jacobs Suchard, producer of Tobleron, Milka, Cote d’Or, coffee Jacobs, Carte Noire et Jacques Vabre. 1993: Kraft General Foods and Jacobs Suchard merge to form Kraft Jacobs Suchard. 2000: Kraft Jacobs Suchard is renamed Kraft Foods • The current setup in Velizy was opened in 1995.

9. KRAFT FOODS, FRANCE • 1,500 employees • Turnover in 2003: € 1.01 milliard • As a part of a global company, Kraft Foods France has to follow a global strategy designed in the US headquarters, but it has a large scope of autonomy in question concerning local operations and it functions as an independent profit center responsible for driving strong results • An ambition: To be the leading group of food brands in France by uniting quality products, staff and services

10. KRAFT FOODS, FRANCE PRODUCTS • Kraft Foods Inc. has a great number of products all over the world but its main assets are the brands, and the range of the brands can be different for different countries • Kraft Foods France has 10 leading brands and 180 references

11. KRAFT FOODS, FRANCE • France is an important location for Kraft Foods Inc, for it has: • Large market with wealthy customers • High educational level • High quality, trained employees • Excellent infrastructure • Central location in Europe • Kraft Foods Inc. plans to expand product lines in France and increase its market share • France is the second largest European contributor of revenues to the group after the UK • Kraft Foods France owns manufacturing units in Havre and Strasburg, but has no plans to increase its manufacturing capacity in France. Probable location of new plants might be in the Eastern Europe

12. KRAFT FOODS INC.- COMPANY VALUES

13. COMPANY VALUES • Because KF, France is a branch of an American company, the culture of mother company is very dominant. The company is well structured, it uses integrity policy which means that the corporate values and rules are set and controlled from the US in the form of instructions, guidelines, requirements etc. and must be implemented in all KF offices all over the world without exception • As a feature of American business culture the French employees perceive a strong emphasis on a short-term performance • Since the company has been in France for a long time, it has largely integrated American culture. Some cultural values are well adaptable and welcomed by the French. Example: informal dress, less formalities, simple procedures, tu vs. vous. However there are some differences which reflect local cultural specifics

14. FRENCH vs. AMERICAN VALUES • American culture is very specific about what common sense and proper behaviour are; therefore many of the instructions designed in the US and required to be directly implemented in the French unit may sound pathetic and are not taken seriously by the staff. Europeans are more reasonable in their judgments and more often rely on common sense rather than on instructions. Examples: The Conduct Code, Sexual Harassment • French employees do not like precise instructions, but prefer a broader definition of their duties, goals and objectives • Money incentives are not as effective in France as in the US. Example: Copied after successful experience in the US a new bonus for innovation was introduced and then cancelled few years later as ineffective • French employees are more individualistic. They need more autonomy and less control • French employees are more concerned with overall quality of life, i.e. balance of work/family/leisure. Their American peers are more career/job focused

15. FRENCH vs. AMERICAN VALUES • American culture is very vocal, aggressive, it is confidence and ability. It is fine to boast of yourself and your own achievements, in Europe one has to be more modest • In America it is good to admit a mistake in Europe there is more formality, you should not explicitly talk about what you have done wrong, it takes more creativity and diplomacy to speak about mistakes • Americans immediately go to the bottom line with results and recommendations. How you did this nobody is interested as long as you can justify your findings. For the French the process is more important. They tend to provide large volume of supportive information. Example: this difference can be seen in American and French presentations • American peers often meet outside work for other social activities. French culture does not support this tradition

16. What does KRAFT FOODS do to instill its values in France’s unit? • As a multinational, the company provides multicultural training to its managers through Internal Mobility Program. In frames of this program the managers are transferred horizontally and vertically within the unit as well as to the foreign branches. Example: According to Ms. Martine Steinkuler, Directeur Rémunérations & Avantages Sociaux, in 4 years 1/3 of the company change their jobs by moving within KF • Values workshops are designed to facilitate understanding of different cultures by organizing conference calls among managers of international KF’s branches to solve real life business problems. These workshops also provide training in inter-cultural communication, conflict management, teach how to resolve different situations, build action plans etc • The role of expatriates is not just to fulfill professional duties but also to be cultural mediators. Example: Mr. Adrew Victa, Finance Director, US expat, interprets instructions from the US to better explain them to the French employees. He often has to explain a cultural background of an issue • The Young talent program. Attract young talent from all the countries. Many of the young work in different countries during the first several years of their career in KF as a part of motivation program as well as for adaptation to the multi-cultural environment

17. CONSTRAINTS IN FRANCE • Most of the company locations have some constraints, which are different in every country. As to France, however many benefits the company gets here, it has to face few constraints and most of them are related to the government policy • Strict labour laws not favouring business. • Strong unionism among employees. “…in some cases even white collar employees are unionized” • Too many regulations, complicated procedures, formalities. “…even employee training program is formalized” • Notoriously known bureaucracy • Non-cooperative government, not flexible for strategic decisions, without vision. “…do not think what is good for the economy, how to facilitate employment etc., more concerned with protecting the status-quo” • Although France is a very important location for KF, the Company is very cautious when it concerns plans of expanding business in France. The above listed constraints translate into “a lot of lost opportunities for France”. The country is often losing projects to other countries

18. ADAPTATIONS TO FRANCE Recruitment and Selection • Most of the employees in the France’s unit are French nationals. The company recruits the majority of its people inside the country. Very few expatriates have jobs here and only in the senior managerial positions. The reasons are: • Expatriates are very expensive. Hiring an expatriate usually involves both direct (salary, usually double) and indirect (family accommodation) costs • Local employees better understand the market and local culture • Qualified employees are available in France • The recruitment decision for staff and low managerial level is taken in France. Senior managers must also be approved by Kraft Western Europe and/or Kraft International Commercial (depends on the level of a manager) • Most of the vacancies are closed by promoting people within the company. Entry level vacancies attract most of the people through The Young Talent Program. Every year only 3-4 managers are hired from outside. The company is concerned about bringing up managers from within. As a result, the employees’ loyalty to the company is high and the Seniority Level (the average number of years in the company) is 9 years (very significant)

19. ADAPTATIONS TO FRANCE Compensation • The salary level in each position is comparable with the average in the industry in France and must be within the 3rd quartile. The situation in the competing companies is constantly benchmarked • All employees are ranked according to the level of responsibility and quality of their performance. Above 80% of them receive “good” ranks. Very few are ranked as “outstanding” or “low”. This system fits into the perception of equality i.e. equal contribution to the overall results • To better motivate and retain top managers the company has a Profit share policy. About 50 managers receive % of the company profit.

20. ADAPTATIONS TO FRANCE Management Development & Workforce Planning • The French employment system is highly appraised by expatriates for its high integration with education. “…education is driven into the system”. Internship programs for students are very common. They allow to replenish qualified workforce in the local market very quickly • Internal Mobility Program allow managers to work in different functional areas and introduce local employees to other cultures and mentalities • Each employee has KPI’s and a career development plan. As a result, everyone knows what he/she should do to get promoted and what are his/her career prospects. As a job security is very important in France, this policy motivates people and increase their loyalty to the company. (Annual workforce turnover <3%) • HR department has a long-term plan for every employee, including his/her abroad posting, promotion etc. The plan is constantly monitored and updated.

21. ADAPTATIONS TO FRANCE Job Design • Job descriptions in the French unit are made broader in order to address the issue of higher autonomy and less control. According to Ms.Martine Steinkuler a broader job design helps to overcome a fear of the lack of creativity and the feeling of total control in workspace

22. KEY COST OF OPERATINGIN FRANCE • Although tax burden in France is mentioned to be higher than in many other countries where KF is present, it is not reported as a serious constraint. According to interviewees the key operating costs are: • Social costs. It is extremely expensive to obey all the labour laws and especially to lay off people • Salaries. As high as in many other European countries but with lower productivity of labour • Manufacturing. It is becoming more and more expensive and less efficient to produce goods in France • Availability of skilled labour. Better than in many other countries due to the high education and qualification of employees • Organization structure cost. Comparable with other European countries • Communication barrier is not mentioned as a constraint. The company uses French as working language in France, but most of the employees know English, which is a business language among KF units

23. ADVICE FOR THOSE COMING TO DO BUSINESS IN FRANCE • Most of the interviewees agreed that France is not a good place to open a new business, especially for a low value-added products. The best idea would be to benefit from France’s large market without running business operations here. Ideal place for knowledge-oriented industry or just headquarters. • “We realize that the government is trying to change the situation for better but it is not consistent and obviously doing not enough… the situation does not seem to be changing in the near future.”

24. ADVICE FOR THOSE COMING TO DO BUSINESS IN FRANCE • “France is a great country for its people, culture and quality of life, but not for business” • For those who still decided to come to France the advice is to be prepared to face bureaucracy and bear a high social cost

25. WE THANK • Mr. Andrew Vikta Finance Director. American. Tel. 01 34 88 70 22 (secretary), odanger@krafteurope.com (secretary) • Ms. Martine Steinkuhler-Hettena Directeur Rémunérations & Avantages Sociaux. German. Tél.: 01 34 88 71 20 MSteinkuhler_Hettena@krafteurope.com • Ms. Sylvie Vergne Finance Tax Commercial Risks and Accounting Manager. French. svergne@krafteurope.com