Kellogg to cut 7 percent of workforce by 2017, lowers forecast
By Siddharth Cavale
(Reuters) - Kellogg Co (K.N: Quote), the world's largest maker of breakfast cereals, said it would cut about 7 percent of its workforce by 2017 and also trim production capacity, after reporting another quarterly decline in sales in its cereals business.
Shares of the maker of corn flakes, Keebler cookies, Froot Loops cereals and Eggo waffles rose as much as 4 percent.
The company's cereals business, which includes Special K corn flakes and Rice Krispies, has been battling stiff competition from General Mills Inc (GIS.N: Quote) and private-label cereal brands. Increasing popularity of yoghurt, frozen egg sandwiches and other breakfast items has also hit the business.
Sales at Kellogg's U.S. morning foods business, which includes cereals, fell 2.2 percent in the third quarter ended September 28.
The job cuts are a part of a four-year cost-cutting program, called Project K, that the company launched on Monday. The program includes consolidating factories and product lines, moving them closer to its regional hubs.
Kellogg did not name these locations, but said that about two-thirds of the expected pre-tax charges of $1.2 billion-$1.4 billion over the course of the program would come from supply chain-related actions.
"The primary source of savings will be from consolidating facilities and eliminating excess capacity. It will not be from reducing headcount in our operating plants," Alistair Hirst, senior vice president of the company's global supply chain, told analysts on a post-earnings conference call.
Kellogg had about 31,000 employees globally at the end of 2012. Continued...