Kellogg is to cut around 7% of its global workforce as it revealed flat third-quarter sales and lowered its full-year outlook.
The US cereals and snacks giant today (4 November) outlined a new four-year cost-cutting programme – Project K – that it said will strengthen existing businesses in its core markets and increase growth in developing and emerging markets.
By 2017, Kellogg said it will reduce its global workforce by around 7%. Cash savings from the plan are expected to reach an annual run-rate of between US$425m and $475m in 2018. Kellogg had about 31,000 employees globally at the end of 2012.
“We are making the difficult decisions necessary to address structural cost-saving opportunities which will enable us to increase investment in our core markets and in opportunities for future growth,” said CEO John Bryant. “These actions will set a foundation for our Sustainable Growth operating principle.”
Kellogg has been struggling to boost cereal sales in its flagship North American market as it faces increasing competition from General Mills and private-label cereal brands. Consumers are also increasingly opting for foods on-the-go.
The cost cutting move today was announced alongside flat third quarter sales of $3.72bn in the period ended 28 September. Sales at Kellogg’s US morning foods business, which includes cereals, fell 2.2%.
Operating profit was also down, sliding 1.7% to $504m. Net income, however, climbed 2.5% to $326m.
Kellogg said its full-year adjusted earnings are now expected to come in at the lower end of its previous estimate of $3.75-$3.84 per share, citing weaker-than-expected sales in certain food categories.
The company also cut its 2013 revenue growth forecast to 4-5% from 5% previously.
Click here to view the full update.