- Unilever will be closing an ice cream plant in Henderson, Nevada in August, impacting 300 jobs, according to Reuters.
- The plant makes ice cream and frozen treats for several Unilever brands, including Ben and Jerry's, Breyers, Magnum, Popsicle, Good Humor and Klondike. Unilever spokeswoman Catherine Reynolds told Reuters that closing the Nevada plant "is in the best long-term interest of our business.”
- The work at the Nevada plant will be transferred to other Unilever factories in Missouri, Tennessee and Vermont, Reynolds told the wire service. According to a statement Unilever emailed Food Dive, the closure will not impact consumers.
Like all food manufacturers, Unilever is hoping to increase its margins and find cost savings. And when the global consumer goods giant, which has a strong presence in the United States through its ice creams, tea drinks, dressings and spreads, rolled out its 5-S savings program to all sectors two years ago, the goal was to find 4 billion euros — or about $4.5 billion — in supply chain savings by 2020.
While there have been few statements about the reasons for this plant closure, Unilever has closed other United States factories in the name of supply chain efficiency. A Massachusetts Breyers ice cream plant that closed in 2010 shut down for that reason, putting 201 employees out of work. In 2012, an ice cream factory in Hagerstown, Maryland, with more than 400 employees that produced 60,000 cases of frozen treats each day, closed to divert labor to less expensive plants in other states. And in 2014, the company closed an ice cream plant in Clearwater, Florida, affecting 210 workers.
Industrywide, food companies are using this same strategy to reduce their overhead costs. Nestlé is taking a more extreme approach, closing one of its global factories every month in order to streamline. And just last week, Kellogg announced it was cutting 150 jobs following the sale of its Keebler operations to Ferrero.
While this closure impacts a significant number of jobs, other companies with far less spread that Unilever have made deeper cuts. TreeHouse Foods has cut nearly 1,000 jobs in the last two years by closing plants and its former office in Omaha, Nebraska. The company's former headquarters in St. Louis officially closes this week. Conagra cut 100 jobs this year, closing the former Pinnacle Foods office in Boulder, Colorado. In 2016 and 2017, Kraft Heinz cut more than 1,200 jobs in the name of consolidation. And last year, General Mills cut 625 jobs to cut costs and improve performance in yogurt and baking brands.
Considering the recent time frame of these other closures — and, in the case of Kraft Heinz, the recent financial disaster — it's not clear at this point if these layoffs are leading to the cost savings and efficiencies originally planned. However, according to research statistics collected in the Harvard Business Review, layoffs tend to have a negative effect on a company's stock price. Companies that institute layoffs also tend to show declines in profitability.
In the case of Unilever, at least some of these negative impacts may be true. Trading for the global CPG company closed down 0.75% on Tuesday following news of the plant closure.
However, if the closure was to streamline supply chain, it could bode well for Unilever. Graeme Pitkethly, the company's chief financial officer, said at the company's presentation at Deutsche Bank's Global Consumer Conference this month that Unilever is well on its way to hitting the 5-S program savings target by next year.
But even if the company meets its target, the cost-cutting mentality won't be over. Pitkethly said more actions to save money will be coming. And with Unilever using the strategy of zero-based budgeting — where each business expense has to be justified each quarter — the company will be keeping its eyes open for inefficiencies everywhere.
"The savings journey in Unilever will not simply come to a hard close following 2020, but it'll continue each and every year as the new activity is underway," he said, according to a transcript of the presentation.