- Kraft Heinz will cut a total of 400 jobs this year, 200 of which were eliminated in the first half of 2019, according to a quarterly filing with the U.S. Securities and Exchanges Commission.
- Restructuring programs for the first three months of the year cost a total of $27 million, including $1 million in severance and employee benefit costs. Other exit costs were $2 million.
- Kraft Heinz has been working toward restructuring its business since last year, when it cut 1,400 jobs.
Companies are constantly looking to reduce costs. Citing improved efficiencies, greater investment in automation, and changes in supply chain models, many CPG companies have reduced their workforces the past few years.
Food and beverage companies, including Coca-Cola, General Mills, PepsiCo and TreeHouse Foods, have had to slash jobs or close plants in efforts to be more profitable. Kellogg has been at the forefront of this trend with its Project K cost-cutting program. Nestlé will dismiss 4,000 workers worldwide this year.
Kraft Heinz hasn't had as many layoffs lately. In 2016 and 2017, the then recently merged company cut more than 1,200 jobs in the name of consolidation. Michael Mullen, Kraft Heinz senior vice president of corporate affairs, told Food Dive in an email 1,400 hourly positions were eliminated last year. An additional 200 employees left in the first half of 2019, he wrote.
“These reductions occurred primarily in our EMEA and Asia Pacific zones, as well as in Canada,” he wrote.
The location of the final 200 job cuts was not indicated.
On an earnings call last week, CEO Miguel Patricio told investors that he wants to focus on investment in the company’s iconic brands and increase the company's efficiency, especially in the supply chain and in marketing. Divesting brands is not part of the strategy, he said, confirming talks that the company was no longer exploring the sale of brands including Breakstone's, Maxwell House and Ore-Ida.
Instead, it appears that Patricio is looking to recreate the highest profit margins in the U.S. food industry that job cuts and new manufacturing efficiencies brought Kraft Heinz in the years following the megamerger. Though cutting jobs boosts earnings in the short term, Kraft Heinz should tread lightly. Eliminating positions can boost margins by lowering operating expenses for a company, it can easily become a brain drain solution for the company or transform into an overarching focus at the expense of other areas of the company that can lead to growth.
Clearly, the company’s financial situation demands drastic change, but cutting employees may not be the solution. Kraft Heinz is facing a changing consumer culture. Consumers are no longer content with the packaged goods of yore and are instead focused on eating healthier, functional, better-for-you products.
The company would do well to continually invest in bringing more products that are popular with customers to the market. Doing so does not necessarily mean that Kraft Heinz has to revamp its brand portfolio. It could also choose to reinvest in its brands that are already household names, but update them for the 21st century consumer — something Patricio hinted last week the company may be exploring.