Blog: Industry buckles in for rough ride

Dean Best | 20 October 2008

Once again evidence of mounting financial gloom dominated last week’s news, when we saw the likes of PepsiCo and Cadbury battening down the hatches as the global economy heads into choppy waters.

PepsiCo announced plans to cut 3,300 jobs from its global businesses after posting a 10% fall in quarterly net income.

Responding quickly to a set of disappointing results, principally the consequence of falling sales at its soft drinks business, PepsiCo is now eyeing efficiency gains in order to protect profits and shareholder returns.

PepsiCo has seen pressure on its margins from declining consumer spending and rising costs. Nevertheless, the US food and drink company believes its business remains strong, benefiting from product mix and geographical range. The company argued that this round of job cuts - part of a wider initiative dubbed 'Productivity for Growth' - will enable to it to emerge from the current economic blip in better shape.

Likewise, UK confectioner Cadbury announced a round of lay-offs that, it claimed, will strengthen operations.

"Our new streamlined organisation, together with additional cost-reduction initiatives, will increase the focus on implementing our strategic plans and underpin delivery of our margin targets,” CEO Todd Stitzer said.

The company said that it will “de-layer” the regional management between Cadbury's seven business units and the UK head office as part of the company’s goal to reduce its workforce by 15% by 2011.

While food industry majors are looking to trim the fat from operations in order to safeguard margins, the Icelandic food industry has witnessed the most devastating impact of the turmoil in the financial markets seen to date.

Speaking to Iceland’s food manufacturers last week, just-food learnt that the collapse of Iceland’s banks has left businesses denied access to foreign currency and overseas credit. For an industry reliant on imports, the results could be devastating.
 
In the coming week, just-food will be providing live coverage from SIAL, when the great and good of the sector convene at the biennial exhibition in Paris. Innovation is likely to be a hot topic at the event, as the industry looks to the future and formulates strategies to battle the current downturn.