Dive Brief:
- Mondelez International will be laying off 600 workers from its Chicago bakery following its announced next step in its supply chain reinvention plan. The company is investing $130 million in its North American biscuits supply chain — "the installation of four state-of-the-art manufacturing lines — 'Lines of the Future' — at the company's Americas production facility in Salinas, Mexico, which opened late last year," according to a news release.
- Employees at the company's Chicago bakery will see nine production lines at the historic Chicago facility shut down in lieu of the new lines in Salinas.
- The investment is in addition to more than $170 million in investments in manufacturing lines at its U.S. biscuit plants in Fair Lawn, N.J., Naperville, IL, and Richmond, VA. Over the past few years, Mondelez has also invested in other technologies and capabilities in its North American supply chain.
Dive Insight:
Despite the shutdown of some production lines, Chicago will remain one of the company's largest North American facilities by headcount, and the company assures that it will continue to invest in the Chicago facility.
"The Chicago plant has been and will continue to be an important part of the company's North American biscuit footprint, producing a variety of beloved consumer products," said Olivier Bouret, vice president of the North America integrated supply chain, biscuits, in a press release. "While the new investment will affect approximately 600 positions in Chicago, we're committed to treating all impacted employees fairly through this difficult time."
Mondelez is now able to refocus more on biscuits and the rest of its snack portfolio after merging its coffee business with D.E Master Blenders 1753 to create Jacobs Douwe Egberts, of which Mondelez holds a 44% stake, earlier this year.
"With the creation of the coffee joint venture now complete, our portfolio is focused even more on snacks," said Mondelez chairman and CEO Irene Rosenfeld in a press release. "In addition, we're continuing to make excellent progress driving supply chain productivity and overhead cost reductions to deliver top-tier margin expansion and earnings growth. This provides additional fuel to step up investments in marketing, sales and capacity expansion to accelerate revenue growth and improve market share, both now and over the long term."
Mondelez has increased its full-year 2015 organic revenue growth target, and the company expects "to capitalize on the margin expansion momentum in our base business to offset the margin dilution related to the coffee transaction," Rosenfeld said in a press release. Its profit beat analysts' expectations, and shares saw an up to 4.9% uptick in early trading following its earnings release.