- In a move designed to streamline operations and limit per-pound production costs, Kellogg has announced it will cut 223 jobs at its RTE cereal plant in Battle Creek, Michigan, by the end of this year.
- Efforts will shift to the production of bran cereals and "bumped rice" for Rice Krispies Treats. Bumped rice is dried pre-cooked rice fed through rollers to slightly flatten the grains and create small cracks to aid in puffing.
- Kellogg indicated that it would idle two production lines at its Porter Street cereal plant in Battle Creek but keep them in place in case demand picks up for struggling brands such as Special K and Kashi.
This is the second layoff this year for the company's Battle Creek operations. Kellogg previously cut 250 positions, both at its Michigan headquarters and elsewhere, as part of its Project K initiative to cut costs and bolster efficiency.
Of the 223 layoffs set to occur later this year, 187 are positions represented by Local 3-G of the Bakery, Confectionery, Tobacco Workers and Grain Millers Union. Kellogg officials said they were giving the union an opportunity to comment on the cuts before the decision is finalized, but there are likely to be painful economic impacts given that Kellogg is the second-largest employer in the area.
Project K was designed to trim $425 million to 475 million from the company's annual costs by next year. Kellogg has also turned to new supply chain innovations to cut costs. It adopted a new distribution method for its snack segment, shifting all of its snacks to a warehouse system — and cutting about 2,000 jobs in the process. Before this, 60% of the company's snacks were distributed through direct store delivery.
Kellogg's latest sales report, released August 3, showed second-quarter operating profits were up 6.9% to $544 million compared to the previous year. However, net sales — particularly in the slow-moving morning foods segment — had declined 2.5% over the same period to $3.19 billion.
Shoppers are generally moving away from traditional processed cereals in favor of yogurt, smoothies and on-the-go breakfast items, leaving legacy cereal brands such as Kellogg struggling to increase sales. Unless a large proportion of U.S. consumers suddenly becomes irresistibly drawn toward bran or rice cereal, it's hard to tell whether these cuts will significantly boost the company's profits in the long term.
Streamlining operations costs is a helpful way to jump start profits, but Kellogg needs to reinvigorate sales — otherwise the company may have nothing left to cut. And while leaving two production lines ready to go in case of more product growth is an optimistic move, the company needs to work on its R&D and marketing to ensure they don't remain unused.