Kellogg Company is based in downtown Battle Creek. Photo via flickr.com
A food maker in the region is closing distribution centers across the country as part of a multi-year restructuring initiative.
John Bryant, board chairman of Battle Creek-based Kellogg Company, said yesterday Kellogg will exit direct store delivery for its U.S. Snacks business unit, “moving completely to our (retailer) warehouse distribution system.”
That means Kellogg will no longer ship U.S. Snacks product directly to its customers' stores but will instead ship product to its customers' warehouses.
Closures and layoffs
The company will close 39 distribution centers, which could amount to a loss of more than 1,000 jobs, according to multiple media reports.
Kellogg’s Detroit distribution center is its only distribution center in Michigan.
The company said it is providing severance and benefits, as well as offering retention packages for impacted employees "to help ensure business continuity."
"While this is the right move for the future of the company, it was a difficult decision, because of the impact on affected employees," Bryant said. "We are doing everything we can to help our employees manage through this transition."
Bryant said the move is part of a broader strategy to transform Kellogg’s U.S. Snacks business unit.
Bryant said Kellogg believes the shift from direct store delivery to customer warehousing “will allow us to compete more effectively in today's market environment,” which he said has seen consumer habits and the consumer landscape change significantly.
“This is a significant move, and, obviously, a decision like this doesn't come easily or quickly,” Bryant said.
Paul Norman, SVP of Kellogg Company and president of Kellogg North America, said distribution via customer warehouses is something Kellogg already does for “more than three-quarters” of its U.S. sales.
“And it's something we already do at scale with high effectiveness,” Norman said.
Kellogg also announced it will extend its Project K initiative, which was announced in 2013 and slated for conclusion in 2017.
The program originally sought to trim Kellogg’s global workforce by 7 percent and was the result of “weaker-than-expected sales.”
Last month, Kellogg announced the planned elimination of 250 jobs, primarily at its Battle Creek location.
“With the exit of DSD and other initiatives, we are expanding Project K with savings now extending into 2019. This requires additional up-front costs like severance and discontinued leases but also generates additional savings,” said Ronald Dissinger, SVP and CFO, Kellogg Company.