- Kellogg is cutting 150 jobs in North America and taking a $35 million pretax hit following the sale of Keebler and several other brands to Italy's Ferrero Group for $1.3 billion in April, Reuters reported.
- Last year, Kellogg shares lost around 10% of its value as it struggled with increased transportation costs, surging expenses and shifting consumer taste like more better-for-you options.
- "This transaction will result in a smaller, more focused (North American) portfolio with fewer brands... requiring a simpler, more agile and rightsized organization," Kris Bahner, senior vice president for Global Corporate Affairs told Reuters.
The announcement that Kellogg is cutting another 150 jobs is the next step toward streamlining the organization through the its Project K cost-cutting program. When the company said in 2017 that it intended to cut 250 jobs from its North American business over four years, it was expected that it would generate an estimated savings of $600 million to $700 million through the end of 2019.
Now 2019 is entering the latter half of the year and so far Kellogg has continued to make changes that have contributed to marginally increasing revenues. Beyond employee cuts in North America, the company has eliminated jobs in Europe as well as restructured its distribution channels.
In May, Kellogg revealed that it is also eliminating jobs in Europe where employee-related severance costs will total about $33 million. In North America, employee termination-related costs will total about $20 million.
WWMT 3 reported that about 66 will be at the Keebler headquarters in Battle Creek, Michigan, which is already where the majority of the employee cuts have occurred.
While a logical approach to restructuring would center around Kellogg's divestiture of the Keebler cookie business, the company could also be looking to cut jobs related to distribution. In 2017, the cereal maker transitioned from a distribution model from direct store delivery to a warehouse model. Since Kellogg announced the switch, it has eliminated more than 4,000 jobs in 30 distribution centers nationwide. The company could continue paring down its employees associated with the former DSD model.
Layoffs have been a familiar part of life at Kellogg for three years now, and while it is a blunt instrument with which to achieve cost savings, it has worked. Kellogg reported revenue of $3.4 billion for the first quarter of 2018, up from $3.2 billion in the year-ago period. In 2019 those sales figures once again grew by 3.5% to 3.5 billion. In its earnings report, that net sales increase was attributed to "consolidation" of distributors.
Kellogg is not alone in its need for a revenue jolt through refined distribution systems and overhauled portfolios that add faster-growing brands and products that are more relevant to today's shopper. However, its primary focus seems to continue to be restructuring and layoffs. Even when looking at popular products like RXBAR, which Kellogg bought in 2017 for $600 million, the company laid off about 20% of its staff in 2018.
The only issue with this strategy is that it is finite. There are only so many employees that can be laid off before Kellogg's is operating with the bare minimum. At that point, it will be visible whether this restructuring cost-cutting measure was effective or if it were only a temporary Band-Aid over the bigger problems of changing consumer preferences and waning interest in breakfasts, snacks and frozen food.