US snacks and beverages giant PepsiCo has said it is to close four Frito-Lay facilities in order to consolidate its manufacturing network.
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The company’s Frito-Lay North America snacks unit is undergoing a productivity programme with a goal to increase existing capacity by over 10% through “process improvements, selective capacity boosts, and more robust systems to improve production planning”. The company said success at exceeding targeted improvements in existing capacity had created the opportunity to consolidate the manufacturing network.
Frito-Lay will close three of its older plants located in Allen Park, MI, Council Bluffs, IA, and Beaverton, OR. The other facility being closed is Visalia, CA, which is limited to production of three brands. The move is expected to create savings to be re-invested in growth.
The plant closures are expected to be largely completed by the end of this year. About 250 of the approximately 780 jobs eliminated at the four facilities will be added to other Frito-Lay sites. PepsiCo expects to incur a related pre-tax charge of approximately US$160m.
Meanwhile, the company reported a 35% increase in third-quarter net income to $1.36bn from $1.01bn a year earlier. Revenue rose 6% to $7.26bn from $6.83bn in the year-ago period. The revenue increase reflected volume growth, positive price/mix, and net favourable foreign exchange.
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By GlobalData“PepsiCo’s portfolio of businesses delivered another high-quality quarter. International is delivering sustained high growth, Frito-Lay stepped up performance versus the second quarter, and, although North America beverage volume growth slowed in the quarter, we expect improved volume performance in the balance of the year,” said chairman and chief executive officer Steve Reinemund.
Total servings of products sold worldwide increased 4%, driven by international growth. Snacks volume worldwide grew 4% for the quarter, and worldwide beverages volume also grew 4%.
The company’s Frito-Lay North America unit posted 5% growth in revenue to $2.33bn, while operating profit rose 7% to $616m.
Quaker Foods North America posted a 5% rise in revenue to $355m, and a 4% rise in operating profit to $111m. The company said growth was driven by innovation.
