Kellogg reorganises North American business with job losses on the line

USA – The Kellogg Company is planning to restructure its North American business as it looks to focus on certain product categories and increase operational efficiency.

The company has said that it is expecting approximately US$35 million in pre-tax charges related to the move, including roughly US$20 million in severance and other employee-termination benefits, according to a Wall Street Journal report.

The move which may result in about 150 job losses from North American business comes after the company agreed to sell its cookies and snack brand businesses to Ferrero for US$1.3 billion.

The sale includes Keebler biscuits and a handful of other brands and production facilities in Georgia, Kentucky, Washington and Illinois.

Kellogg said it will retain the rest of its North America snacking businesses, including its crackers, salty snacks, wholesome snacks, and toaster pastries brands.

Kellogg said the reorganisation plan is designed to simplify the organisation that supports the remaining North America business after the divestiture and related transition.

The overall project is expected to be substantially completed by the end of 2020.

“This transaction will result in a smaller, more focused (North American) portfolio with fewer brands… requiring a simpler, more agile and rightsized organization,” said Kris Bahner, senior vice president for Global Corporate Affairs.

The announcement follows a similar move in Europe, which Kellogg said it aims to simplify the organization, increase organizational efficiency and enhance key processes.

The plan included cumulative pre-tax charges as well as approximately US$33 million in employee-related costs, which will include severance and other termination benefits.

The company which reported net sales of US$13.55 billion in its last fiscal year is said to be among other global packaged food companies struggling with surging expenses owing to higher transportation and raw material costs.

The sector is also suffering from strain on consumer spending even as they look for more trendier and healthier food options.

The makers of processed foods are struggling to keep up with changing consumer tastes, including the Heinz Ketchup maker, Kraft Heinz which has divested several of its businesses across the globe.

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