Kellogg wants to divert more resources to boost flagging sales and to expand in emerging markets

Kellogg wants to divert more resources to boost flagging sales and to expand in emerging markets

Kellogg is to close plants in Australia and Canada as it embarks to lower costs and improve efficiency across its business.

The company said yesterday (10 December) it will shut a snacks facility in the Australian town of Charmhaven in New South Wales and close a breakfast cereal factory in the Canadian city of London. The Charmhaven plant is expected to close by late 2014. The London facility is set to shut by the end of next year.

Kellogg did not disclose the number of employees working at either site. However, the measures come weeks after Kellogg announced plans to "generate a significant amount of savings", which includes moves to cut 7% of its workforce worldwide by 2017. Kellogg had about 31,000 employees globally at the end of 2012.

Kellogg has seen cereal sales come under pressure, especially in North America and parts of Europe, and wants to divert more resources to boost that side of its business, as well as invest in emerging markets.

"We have a compelling business need to better align our assets with marketplace trends and customer requirements," president and CEO John Bryant said. "To that end, we are taking action to ensure our manufacturing network is operating the right number of plants and production lines – in the right locations – to better meet current and future production needs and the evolving needs of our customers."

Kellogg hopes the cost-saving programme will lead to annual cash savings of US$425-475m in 2018. Announcing the plans last month, Kellogg said it would then spend more on "key strategic areas of focus".

"As we go along, we'll determine the best place to make those reinvestments. But at this stage, the primary focus of our reinvestment is to stabilise and rebuild momentum in our core businesses. We believe we do that through brand building, innovation, nutrition over time," Bryant said last month.

Alongside the announcement of plant closures, Kellogg said it would expand a cereal and snacks plant in Thailand. The extensions to the site in Rayong, a city in eastern Thailand, will be "fully operational" by early 2015.

Show the press release

KELLOGG COMPANY ANNOUNCES CHANGES TO GLOBAL SUPPLY CHAIN NETWORK

Dec 10, 2013

Kellogg Company today announced several changes to optimize its global manufacturing network as part of the company’s recently announced Project K four-year efficiency and effectiveness program. Project K will unlock cost savings that Kellogg will invest in its strategy and grow its business. Through Project K, Kellogg is strengthening its existing business in core markets, increasing growth in developing and emerging markets, and driving increased value-added innovation.

Supply Chain infrastructure changes announced today include:

  • Closure of the Snacks plant in Charmhaven, Australia
  • Expansion of the Rayong, Thailand cereal and snacks plant, and
  • Closure of the ready-to-eat cereal plant in London, Ontario, Canada.

“As with any project of this scope and one that impacts people, these are difficult decisions,” said John Bryant, President and CEO, Kellogg Company. “We are very mindful of the impact these changes will have – particularly to our employees. As our employees and others would expect from Kellogg, we will help those who are impacted through their transitions.”

The London plant is expected to close by the end of 2014 and the Charmhaven plant is expected to close by late 2014. The Rayong expansion will be fully operational by early 2015.

“We have a compelling business need to better align our assets with marketplace trends and customer requirements,” said Bryant. “To that end, we are taking action to ensure our manufacturing network is operating the right number of plants and production lines – in the right locations – to better meet current and future production needs and the evolving needs of our customers.”

Original source: Kellogg