The cost-cutting scheme, dubbed Project K by the firm, will look to optimize supply-chain infrastructure, consolidate common processes or business services across multiple regions and functions and create a new global focus on categories including the continuation of a process designed to create a regional, category-based model.
“The likely outcome of this global initiative is that by the end of 2017, we estimate that Kellogg's will have approximately 7% fewer employees worldwide than we do today,” Kris Charles, Kellogg Company spokesperson, told BakeryandSnacks.com.
Kellogg announced the scheme in its third quarter (Q3) earnings call, in which net sales for the Q3 2013 were reported as $3.7 billion, flatlining compared to Q3 2012.
Where will the axe fall?
According to the data firm FactSet, Kellogg has 31,000 employees suggesting these cut backs would constitute approximately 2,170 job losses.
The company declined to disclose any further specifics of where these cuts would fall within the company saying, “this isn’t a one-size-fits-all initiative”.
Charles said that each of the company’s geographic regions and functions will implement the initiatives that make the most sense to enhance efficiency and effectiveness.
“As you would expect from Kellogg, we’ll help our impacted people through these transitions,” she added.
In the earnings conference call John Bryant, Kellogg Company’s president and chief executive officer, said: “This is a difficult process, but Project K is a pragmatic program designed to be a catalyst for future growth, and it's the right thing to do for the company over the long term.”
The company said that pre-tax savings are expected to reach an annual run-rate of between $425 million and $475 million by 2018.
“Through Project K we will identify significant cost savings, which we will invest in increased brand building to stabilize our core cereal business in key developed markets, as well as in emerging markets and capabilities. We will continue to invest in growth in 2015 and invest to accelerate growth in 2016 and beyond,” Charles said.
Bryant said that Project K is the natural next step in the evolution of the company. “We remain focused on four key areas: Cereal, snacks, frozen foods, and emerging markets. And these areas will receive even more attention as a result of Project K.”
Byrant said that the company remains committed to driving long-term growth within its core cereal businesses and is looking to become a global player in snacks, citing the recent acquisition of Pringles as evidence of this transition.