The breakfast food giant is beginning its restructuring plan in closing a large number of distribution centers across the US, resulting in mass layoffs.
In February, Kellogg’s announced it will be undergoing a major reorganization project that will result in thousands of jobs.
The company said it intended closing 39 centers across the US, including sites in Missouri, New York, North Carolina, Ohio, Texas, Pennsylvania and other states by the end of the year.
The impact
According to Kellogg's, closures and layoffs will be completed by the fourth quarter of 2017. These include:
The cereal maker is closing its distribution centers in North Carolina, effecting nearly 500 employees.
The closure of two Pennsylvania distribution centers will see more than 500 workers lose their jobs.
Over 170 Kellogg’s employees will be laid off in Tennessee.
About 200 workers will lose their jobs in Kansas.
The distribution center in Florida informed more than 240 employees that they were being let go.
Nearly 300 employees are being retrenched in facilities in New York.
More than 200 staff will lose their jobs in Minnesota.
The closure of distribution centers in Texas will lay off more than 420 workers.
More than 1,500 Kellogg’s employees are purportedly being let go.
The company said in a statement that this was a difficult decision to make because of its impact on employees, however, Kellogg's has to keep up with the shifting retail landscape.
The Froot Loops and Corn Flakes maker is looking to save millions of dollars by shifting its distribution from its own network to retailer’s networks. Instead of shipping products directly to stores, they will be shipped to the retailer’s warehouse.
John Bryant, Kellogg’s chairman and CEO, previously said: “Because our customers’ and our own warehouse distribution systems have become more efficient and effective, we can now redeploy resources previously tied to DSD and direct them to the kinds of brand investments that drive greater demand with today’s consumers − ultimately growing our business and our retailers’ businesses.”.
Curtailing the dive
Kellogg’s cost-cutting moves come amid a much weakened demand for breakfast cereals.
In Q1 2017, the company reported sales of $3.26bn, down 4.1% from the same period last year.
Customer confidence in the Kellogg’s brand name has also taken a hit, falling from 60th to 84th place in the last four years. This data was provided by Brand Finance, which calculates a company’s brand on its earnings, stock and profits to determine how much a company would pay to license its brand as if it did not own it.
However, there could be a slight silver lining for some of its employees.
The Battle Creek, Michigan-headquartered company said it has been “actively engaged in conversations with some of our biggest retail partners who have expressed strong interest in hiring these employees for high-demand roles once the transition is complete.”
Kellogg’s reduces sugar in cereal bars
In other news, Kellogg’s has announced it has cut sugar levels in three of its cereal bar and fortified them with vitamins.
Sugar has been reduced by 24% in Coco Pops bars, while Frosties and Rice Krispies Bars have had a 19% sugar reducation. Vitamin D and extra fibre have also been added.
The company’s sugar-reduction program aims to remove 2,000 tons of sugar from the nation’s diet by the end of 2017.
According to Dr Alexa Hoyland, senior UK nutrition manager at Kellogg’s, the reformulation is part of Kellogg’s commitment to give people more of what they want.
“We want to provide opportunities for parents to give their children vitamin D, which we know they are not getting enough of,” she said.
The bars retail at £1.99 ($2.56) for a pack of six.
