Coverage: Kellogg pulls out of Venezuela

Kellogg Co., citing the “deterioration” of a country in the midst of an economic meltdown, said Tuesday it was closing operations that employed 400 workers and produced the majority of the breakfast cereal consumed by Venezuelans.

Juan Forero of The Wall Street Journal had the story:

“The current economic and social deterioration in the country has now prompted the company to discontinue operations,” the Battle Creek, Mich.-based company said.

Workers who arrived at the company’s plant in Maracay in central Venezuela found a communiqué from Kellogg’s saying it had closed. The government’s labor minister, Néstor Ovalles, then arrived at the plant, and told the workers the state would “ensure their rights and employment.”

Kellogg did not elaborate on what prompted it to leave Venezuela, but companies here face strict price controls, heavy red tape, hyperinflation, currency controls and a lack of machine parts. Many other major companies have fled as Venezuela’s economy has contracted by 40% in the last five years, including Kimberly-Clark, General Mills and companies that pump oil or service that industry.

Corina Pons and Alexandra Ulmer of Reuters reported that the government took over the plant:

Kellogg confirmed later on Tuesday that its manufacturing plant had been seized by the leftist government, the latest company to jump ship amid Venezuela’s tough business climate.

“I’ve decided to hand the company over to the workers so that they can continue producing for the people,” Maduro said at a campaign rally ahead of Sunday’s presidential election.

“We’ve begun judicial proceedings against the business leaders of Kellogg’s because their exit is unconstitutional,” Maduro added to cheers from red-shirted supporters.

Maduro blames Venezuela’s crisis on an “economic war” he says is waged by Washington, greedy businessmen and coup-mongers.

Kellogg announced its retreat earlier on Tuesday, making it the latest multinational to exit the oil-rich country, which is heaving under hyperinflation and strict price controls.

Juan Carlos Hernandez of The Associated Press reported that Kellogg would like to return once conditions improve:

The factory, with a giant figure of Tony the Tiger lording over the entrance, produces 75 percent of the breakfast cereals consumed by Venezuelans, according to the company’s website. A spokeswoman for Kellogg’s said its market share was lower than 75 percent but declined to say by how much.

Omar Rodriguez, who had spent 26 years working at Kellogg’s, said he didn’t know how he would feed his three children without his job.

“It’s going to be a tough blow,” Rodriguez said, expressing anger that the company had decided to let go of its workforce in such an impersonal manner. “What am I going to bring home? Nothing.”

The company said it looks forward to resuming operations once conditions improve. The company has been producing cereal in Venezuela since 1961 and the market had at one point been its biggest in Latin America after Mexico, although in 2016 it deconsolidated its Venezuela business from the company’s overall earnings results.