Dive Brief:
- General Mills announced Thursday that the company would sell or close five plants in the U.S., Brazil, and China, which could lead to 1,400 job cuts.
- In the U.S., General Mills will close down its Progresso soup plant in Vineland, N.J., which will affect about 380 jobs. It will also sell its Martel, OH, plant, which makes baking mixes for the company’s convenience stores and foodservice segment, to Mennel Milling Co. for about $18 million. This impacts 180 jobs.
- Internationally, General Mills will shut down its snacks plant in Marília, Brazil, and will stop manufacturing meals and snacks at its São Bernardo do Campo, Brazil, facility, which will eliminate 420 jobs. The company will also stop production of fruit snacks and Trix at its Nanjing, China, plant, cutting 440 jobs.
Dive Insight:
The plant changes reflect consumer trends and lagging sales in these categories. They also represent General Mills' first move of this kind since identifying brands and segments with the "strongest profitable growth potential" during a recent earnings release.
Those brands and categories will be the focus of growth investments in fiscal 2017 and fiscal 2018, the company said. In the U.S. retail segment, they include cereal, snack bars, the natural and organic portfolio, yogurt, Totino's hot snacks and Old El Paso Mexican products. Yogurt, especially, is set to undergo major changes, as the company announced earlier this month it would "renovate" 60% of its yogurt business within the next year.
Progresso is notably missing from that list. The canned soup brand has struggled in recent years, as has the category in general, though a General Mills spokesperson told The Wall Street Journal that the brand was still relevant to the company.
General Mills pushed to align the brand with trends like locally-sourced ingredients, but in April, Campbell won a challenge to a Progresso ad in which General Mills said it sourced most or all ingredients from farms in rural, southern New Jersey.
General Mills reported a 6% decrease in revenue for fiscal 2016, the second consecutive year of sales declines, as consumers continue to shift from packaged foods to fresh foods and products they deem more "natural" and "better for you."
For years, General Mills has focused on cutting costs with initiatives like Project Century, Project Catalyst, and Project Compass to maintain profitability in the face of falling sales. Since spring 2014, General Mills has reduced its workforce by 10% including this most recent wave of job cuts.
But job cuts and cost-cutting may only take the company so far, investors have warned. General Mills continues to also focus on boosting the top-line through acquisitive growth, such as Epic Provisions meat snacks, startup investments through its 301 Inc. unit, and expanding its natural and organic brand Annie's.