Danone payments case study

Centralising financial flows at a world leader: Danone has used CashSolutions since 1997

Danone is the world leader in many food industry sectors and is recognised internationally for its brands like Actimel, LU, Volvic, Evian and Danette. Present in 120 countries with a workforce of nearly 90,000 people, the group posted revenues of 13,131 billion euros in 2003.

Nevertheless, the Danone organisation’s human resources and finance management is highly centralised.

The operating companies are not judged based on financial expenses/revenues but rather on EBIT and OFCF.

Financial expenses are managed at headquarters. The role of the Treasury Department at Danone is to centralise and manage risks (interest rates, FX, counterparty, liquidity, etc.) and coordinate the Group’s network of treasurers (strong functional ties). Danone Finance is a financial company and the central corporate treasury based in Paris. It is dedicated to cash transactions, while the accounting for the Group’s financial companies reports to the Treasury Department.

Payment factory

When the project was launched in 1997, the first objective was to centralise and secure so-called risky payments for all of the Group’s subsidiaries (about 80). These payments were manual paper payments and international bank transfers.

At the same time, the Group implemented a global messaging tool, Lotus Notes, which was supposed to enable all entities to communicate electronically. Consequently, it decided to select this tool as the basis of exchange for the treasury department as well.

As such, the adopted solution was supposed to offer not only the client payment functions (in the term’s sense of client/server, since the Internet was at its beginnings then) for the subsidiaries, but also the signature and validation functions via Notes.

After a search of many French and international publishers, it turned out that only the CashPooler solution from DataLog Finance, a very young company then, corresponded to the Group’s needs.

In addition to rather rich client functions, CashPooler already integrated the messaging tool that corresponded to the required organisation: the treasurer validates, the first signatory receives an email informing him accordingly, and he signs. The second signatory receives an email informing him accordingly, and he signs. The lots are then sent to headquarters.

Consequently, an agreement was signed with the software package publisher in 1997.

Fast and easy to implement

Various things enabled this project to be a success.

The product itself to begin with. “At the time, it was experienced as a simple solution, easy to implement because it was based on the Group’s existing messaging tool” states Vania Ferrat, then IS Manager for the Group’s Treasury Department and today Cash Management Director.

The project organisation was implemented next. It was important that there were people dedicated to the project.

Vania Ferrat took care of the entire technical and organisational part while a functional project manager, the director of the international treasury department, took care of the services to be implemented.

They had to free up time and, a key point, get the subsidiaries involved, which was relatively easy at Danone given the group’s organisation.

Consequently, the subsidiaries adhered to the project rather easily.

The Danone Finance team travelled to all of the subsidiaries and each time got the future users involved via an information and discussion meeting followed by product training.

Functions available today

The first functions implemented were payments and hedging, which were launched simultaneously. Headquarters retrieved the subsidiaries’ information and sent it to the bank (unique for international payments) while indicating to the bank that it was paying for them, (“on behalf of”).

This way Danone Finance paid on behalf of all the subsidiaries. In return for the payments, Danone debited the subsidiaries’ current accounts.

Following the success of this first project, a netting factory was launched next. Euro zone pooling has been available since 1999 (€ as the account currency) and multi-currency pooling (19) worldwide since 2001. 30 countries and 74 subsidiaries are integrated in the pool today.

Benefits

The project’s benefits substantially exceeded the initial expectations.

The return on investment, which was not the primary objective, was substantial and quick due to the reorientation of the local treasury teams and the very sharp drop in banking costs.

The use of the same tool by the entire Group instead of the 20 or 30 different electronic banking solutions simplified and especially secured the exchanges.

The interfacings between the ERP (SAP for approximately 50% of the Group’s revenues) and the electronic banking tool are extremely simple today, which has made it possible to close in on the 2007 objective: one ERP, one electronic banking tool and one interface with the banks (SWIFTNet).

For Vania Ferrat, “CashPooler makes it possible to centralize all of the complexity (complexity of banking formats, ERP formats and bank exchanges) so more secure tools that are easier to use and implement can be offered.”

Furthermore, Danone has also considerably improved its internal oversight – which is extremely important with the current regulatory developments (IFRS, Sarbanes-Oxley, etc.) – and today has a better view of the distribution of subsidiaries’ banking flows.

This gives it the real ability to readjust the flows at any time with one bank or another and to launch new invitations to tender since it really has the ability to easily move from one bank to another.

Future developments

Two projects are currently underway: migrate all functions to the “full Web” version of the solution and completely abandon the client/server version while centralizing the domestic flows via SWIFTNet.

This will make it possible to eliminate all local bank communication solutions. A SWIFTNet pilot is operational with a major French bank.

Eventually several MA-CUG will be opened.

Conclusions

The Danone project was a real success, and made it possible to rationalise flows, secure transactions and above all to continue this centralisation process by extending it to domestic flows.

Danone

Danone is the world leader in many food industry sectors and is recognised internationally for its brands like Actimel, LU, Volvic, Evian, Danette, etc.

The Group posted revenues of 13,131 billion euros in 2003 and is present in 120 countries with a workforce of nearly 90,000 people.

To learn more: www.danone.com

DataLog Finance

DataLog Finance is a treasury and cash management software publisher (CashPooler, CashValue, CashMatching, CashRisk, CashReport, CashNetting) created by cash management, software and new technologies professionals. Its products are based on a full Web and J2EE 3-tier architecture. DataLog Finance has won the confidence of major Groups around the world. Its products are used daily in more than 100 countries, by more than 1,000 entities and several hundreds of billions of Euros of flows are exchanged daily with these products.

To learn more: www.datalog-finance.com