Chocolate and candy maker Hershey Co. said Tuesday that it plans to cut 15 percent of its jobs, the latest company that wants to boost profits by eliminating workers.
Anne Steele of The Wall Street Journal had the news:
Incoming Chief Executive Michele Buck said the company’s “Margin for Growth” initiatives “should give us the flexibility to invest in certain parts of our business.”
Ms. Buck, who is set to become Hershey’s chief executive in March, has said Hershey wants to become a more diversified snack company.
“Hershey plans to continue to make investments to grow its core confectionery business and expand its breadth across the snackwheel by capturing new usage occasions and participating in on-trend categories,” the company said Tuesday.
Ms. Buck said the company is working to return its lagging international businesses to profitability as soon as possible and said Hershey should be able to achieve its adjusted operating profit margin target of about 22% to 23% by the end of 2019.
The company said it anticipates total pretax charges of $375 million to $425 million, including employee separation benefits of $80 million to $100 million. It said the job cuts will mostly involve its hourly employees outside of the U.S.
John Kell of Fortune reports that other food companies have taken similar steps:
The move by Hershey to cut costs comes at a time when many major food manufacturers, including General Mills and Kellogg, have been cutting jobs to restructure their operations. While the industry has been busy cutting costs to boost cash flows, the aggressiveness at 3G-backed Kraft Heinz has put some pressure on others in the industry to step up their game.
Hershey has opted to go it alone after the chocolate maker spurned a takeover bid by snacking peer Mondelez last year. The “Margin for Growth” plan is the first big initiative being implemented by Michele Buck, the incoming president and CEO who was named to those roles late last year. Buck is responsible for the strategy and vision at Hershey, which includes hitting the 2017 sales target the company set earlier this year, projecting growth of 2% to 3% due to the rollout of new Hershey’s Cookie Layer Crunch bars, expanded distribution of barkTHINS, and new Reese’s and Krave snacks.
In her prepared statement, Buck said that the initiatives announced on Tuesday would give Hershey “flexibility to invest in certain parts of our business. Our objective is to ensure that we always have the right level of innovation, marketing plans and consumer and customer expertise to drive net sales growth, especially in our North America confectionery and snacks business.” Buck and her team will present more details about that strategy at the company’s investor conference on Wednesday in New York City.
Anne Gasparro of Fox Business reports that Hershey’s sales barely rose in 2016:
The maker of chocolate Kisses and Reese’s peanut butter cups has branched out in recent years, buying a beef jerky brand and creating protein drinks in an effort to grow beyond the candy aisle.
But with sales only inching up 0.7% last year, Hershey is looking for ways to improve its profit margins and justify its independence. Last year, Oreo cookie maker Mondelez International Inc. attempted to buy Hershey, arguing that it could help Hershey expand internationally. Hershey rejected the deal, and Mondelez ended its pursuit.
Less than two months later, Hershey’s Chief Executive J.P. Bilbrey said he would step down. Incoming Chief Executive Michele Buck is expected to describe her vision for the company to investors on Wednesday. Analysts will be watching whether the cuts appear deep enough to head off persistently slow growth in the food industry and underperformance in China.
Many food makers have slashed spending in the four years since Brazilian private-equity firm 3G Capital embarked on an aggressive cost-cutting crusade after buying H.J. Heinz Co., which later merged with Kraft Foods Group Inc.
