Snap! Crackle! FLOP! Kellogg to cut workforce
Cereal super company experiencing sales slump
The world's largest maker of breakfast cereals, Kellogg Company has announced that it would cut about seven percent of its workforce by 2017. They also announced that they would trim production capacity. It's been a tough few years for the cereal industry; there's been another quarterly decline in sales in its cereals business.
Limited edition art sculpture Sugar Frosted Fat Tony, a vinylized riff on Kelloggs' Tony the Tiger, has "humorously exaggerated" the mascot's heft as a commentary on the low nutritional value of the cereal.
Coupled with the Increasing popularity of yogurt, frozen egg sandwiches and other breakfast items has also hit the cereal business. Sales at Kellogg's U.S. morning foods business fell 2.2 percent in the third quarter ended September 28.
Called Project K, the layoffs are a part of a four-year cost-cutting program that the company launched this week. The program includes consolidating factories and product lines, moving them closer to its regional hubs.
About two-thirds of the expected pre-tax charges of $1.2 billion-$1.4 billion over the course of the program would come from supply chain-related actions.
"The primary source of savings will be from consolidating facilities and eliminating excess capacity. It will not be from reducing headcount in our operating plants," Alistair Hirst, senior vice president of the company's global supply chain said.
Kellogg also said it would invest in building its cereal brands and developing its business in emerging markets.
"Overall, net-net it was an okay quarter but the big surprise was the cost cutting, and I think investors are viewing that positively," Edward Jones analyst Brian Yarbrough said.
Project K follows a three-year initiative, K-Lean, that Kellogg had launched in 2009 to save $1 billion in annual costs.
There was a fly in that ointment to that particular practice - Kellogg's quality control weakened due to too many job cuts, leading to product recalls. Between 2009 and 2011, Kellogg recalled packages of cereals, cookies and protein bars.
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