Dive Brief:
- Layoffs at Kraft could lead to better profitability for Kraft Heinz, according to a Credit Suisse analyst. "Kraft needs to get smaller before it can begin to capitalize on its scale," wrote analyst Robert Moskow.
- Since the merger, Kraft Heinz has already announced two major rounds of layoffs, including 2,500 non-factory jobs in August and 2,600 factory jobs earlier this month. "The Kraft restructuring plan thus far entails a 10% reduction in the workforce with half at the headquarters level and half in the supply chain," Moskow wrote. "But Heinz' workforce shrunk by 27% after 18 months under 3G's management."
- After more jobs cuts, Kraft Heinz could "achieve if not exceed expectations for EBITDA growth even if revenue continues to decline," Moskow wrote. According to Business Insider, "Credit Suisse projects 2017 EBITDA of $8.47 billion or 28% increase over three years — writing that even if sales were to decline 5% for Kraft, that projection would still be achievable."
Dive Insight:
Earnings recently declined for the combined company, dropping 3.4% to $1.48 billion for the three months ending in September as compared to the previous quarter. It reported revenue of $6.36 billion falling 9% from a year ago, which took into account pro forma revenue.
Cost-cutting measures have become a necessity for many food and beverage companies, from Coca-Cola to Mondelez, to attempt to alleviate falling profits.
In addition to layoffs, Kraft has made other cuts to trim down its operations, like no more free snacks for employees.