BATTLE CREEK — Kellogg Co. plans to invest roughly $45 million to reorganize its North American supply chain network, a move that already has had a negative effect on workers in its hometown of Battle Creek.
In recent filings with the U.S. Securities and Exchange Commission (SEC), the multinational food manufacturer outlined its strategy to shift production of various products — mainly ready to eat cereal (RTEC) — to more optimal lines across its network in the Americas.
The company estimated that it would wrap up the efforts by 2024.
The SEC filing stated that the company would not shut down any production facilities. However, on the same day the Form 8-K was filed, Kellogg also announced that it would be cutting 174 hourly and 38 salary jobs at the company’s Porter Street facility in Battle Creek, which has served as one of its primary production facilities over the decades.
Kellogg issued a statement in response to MiBiz’s request for an interview about the restructuring.
“In our ongoing analysis of our RTEC network, it’s clear that some locations are more cost-effective and better performing than others,” said Spokesperson Kris Bahner. “We must ensure we have the right capacity in the right locations to reduce costs, increase efficiencies and become more competitive.
“After very careful consideration and detailed analysis, we have presented a planned reallocation of cereal production across our RTEC Americas network. If these plans are finalized, they will deliver significant savings that could be reinvested into the business to drive growth and help to regain share.”
Kellogg underwent a similar reorganization in 2017 that resulted in the company cutting 223 jobs in Battle Creek. Bahner said the latest measures would build on that initial effort.
Of the $45 million it is investing in the reorganization, Kellogg estimates that $4 million will be used on employee-related costs, such as severance and other termination benefits. An additional $21 million will be used for capital expenses.
“While this is the right thing to do for the business, any decision that impacts people is incredibly difficult,” Bahner said. “We are committed to helping our talented and dedicated employees, and we are devoted to working with them and their union to ensure they have outplacement assistance, resources and support through this transition.”
The Bakery, Confectionery, Tobacco Workers and Grain Millers Union (BCTGM), which represents many Kellogg employees, did not respond to requests for comment.
The company and union were at odds toward the end of 2020 when Kellogg sued the BCTGM for alleged ongoing contract breaches under a 2015 collective bargaining agreement. However, the lawsuit was withdrawn a couple of months later.
Kellogg Co. reported a 3-percent increase in net sales for the second quarter of this year, while Kellogg North America saw profits plummet by 22 percent. The company cited disruptions from the lingering COVID crisis, including halts in production at some facilities around the world, as a reason for the drop in revenue. The second-quarter earnings also compare to the same period last year when the company reported a spike in sales as consumers stocked up on packaged goods during the pandemic.
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