Cereal giant Kellogg Company continues with its latest round of massive layoffs. The company announced that more than 400 employees will be looking for work after it closes two distribution centers in Texas. The Michigan-based cereal and breakfast food maker said it plans to close the distribution centers in Fort Worth between July 29 and August 1.
The firings are part of the company’s “Special K” initiative, a four-year cost-cutting program announced in November 2014. Special K entails the scaling back of distribution centers and job losses across the country. By the end of 2018, the plan will result in a seven-percent reduction (2,000+) in headcount and savings of between $425.0 million and $475.0 million.
According to the company, the closing of nearly 40 distribution centers across the country will reduce “complexity and cost structure while driving growth and profitability for the company and its retail partners.”
Kellogg said it would be changing its business model, switching from what is known as “direct store delivery” (DSD) to a warehouse model in the second quarter of 2017. Instead of delivering products directly to stores, the company will use a warehouse system that is already being used by “Pringles” chips and frozen foods across the country.
In fact, the warehouse model already accounts for 75% of Kellogg’s U.S. sales. The transition from the DSD network to the warehouse model will be complete in the fourth quarter of 2017.
“While this is the right move for the future of the company, it was a difficult decision because of the impact on affected employees,” said John Bryant, Kellogg’s chairman and chief executive officer. The company is providing severance and benefits, as well as offering retention packages.
Kellogg’s has been making a lot of difficult decisions lately. On May 30, it was announced that Kellogg expects to close distribution centers in Charlotte and Greensboro, North Carolina by mid-August, a move that will leave almost 500 out of work. The company also announced it was laying off 200 in Kansas City.
Kellogg has been struggling over the past number of years and has been taking steps to streamline operations, which means additional job losses in the U.S. In 2014, Kellogg closed one of its snack plants in North Carolina (eliminating 195 jobs); a snack plant in Columbus, Georgia (325 jobs); and two production plants in Cincinnati, among others. The company also closed plants in Canada and Australia.
At the same time, Kellogg increased production at a plant in Thailand and built a new one in Malaysia.
“Cereal giant Kellogg’s to cut 400-plus Texas jobs,” Dallas News, May 30, 2017.
“WARN Notice – Summary Count,” North Carolina Department of Commerce, May 30, 2017.
Kellogg Company To Leverage Uniform Go-To-Market Approach, Strengthening U.S. Snack Business, Kellogg Company, February 8, 2017.
“Kellogg Company Announced Third-Quarter Results And New Global Program Designed To Drive Growth and Efficiency,” Kellogg Company, November 4, 2013.