Sector News

Hershey restructuring could cut 15 percent of workforce

March 2, 2017
Food & Drink

Hershey says it expects to cut its global workforce by about 15 percent, with the reductions coming mostly from hourly employees outside the United States.

The Pennsylvania-based maker of Reese’s, Kit Kat and Twizzlers also cut its long-term sales growth forecast to between 2 percent and 4 percent, down from the previous 3 percent to 5 percent. Hershey, which gets the majority of its revenue from North America, attributed the lowered expectations to “changes in U.S. shopping habits” and challenges overseas.

The job cuts, which could come to about 2,700 workers, are part of Hershey’s plan to improve its operating profit margin over the next three years, and the company said it will share more details on the measures in the future. Other major packaged food makers including Coca-Cola, General Mills and Kellogg have been slashing costs as sales growth has slowed.

During a meeting with analysts in New York on Wednesday, Hershey CEO Michele Buck noted that the chocolate and candy category is nevertheless well-positioned because it is “highly impulsive” with “expandable consumption.” And she noted that the company plans to benefit from the snacking trend in the U.S. that has people eating more frequently throughout the day.

Already, Hershey has been trying to transform its portfolio of products to better take advantage of that behavior, particularly as people look for snacks that promise some sort of nutritional benefit. For instance, the company recently introduced “snack mixes” that include its chocolates and ingredients like nuts and pretzel balls. It also acquired a meat jerky company in response to the demand for snacks with protein, and said it will look for other acquisition opportunities.

J.P. Morgan analyst Ken Goldman said he believes many of the job cuts announced by Hershey will come from Shanghai Golden Monkey, a Chinese candy company Hershey acquired in 2014. Hershey has reported declining chocolate sales at its China business in recent quarters, and Goldman called the acquisition “largely disappointing.”

Hershey is expecting pretax charges of up to $425 million over the next three years as a result of its plan to improve the operating margin, which includes the costs of closing plants and offices and other expenses related to job cuts.

Hershey Co. operates eight factories and eight distribution centers outside the United States. As of December, it employed approximately 16,300 full-time and 1,680 part-time employees worldwide. A 15 percent workforce reduction would therefore represent about 2,700 employees.

By Candace Choi

Source: Chicago Tribune

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