Hershey’s to cut 2,700 jobs globally
01 Mar 2017
US chocolate and confectionery major Hershey Co plans to reduce its global workforce by 15 per cent or 2,700 people as part of plans to cut costs and boost profitability over the next two years.
Hershey said that the 2,700 job cuts would be primarily made in its hourly staff outside of the US. Hershey employs around 19,000 full-time and 1,650 part-time employees globally.
The Pennsylvania-based company anticipates that the job cuts will result in total cumulative pre-tax charges of $375 million to $425 million, including one-time employee separation benefits of $80 million to $100 million.
Hershey expects cash savings to reach an annual run-rate of between $150 million to $175 million by year end 2019.
The layoffs are one pillar of the company's so-called "Margin for Growth" program that is aiming to improve operating profit margins by reducing administrative expenses and improving the company's supply chain.
In its most recent earnings release, Hershey had said that the company is weighed down by its foreign business, unfavorable currency exchange rates and other "macroeconomic challenges...especially in China."
Hershey made an ill-timed acquisition of a candy company in 2014 in China, which was just as China's economy slowed and its rivals also made a big push into the country.
"Macroeconomic challenges and trends are affecting consumer shopping behavior resulting in continued softness within the China modern trade, particularly the tier one hypermarkets where the company generates the majority of its chocolate sales," Hershey said in a statement.
The chocolatier plans to focus on getting its products in more small stores in China, emphasize core products and reevaluate its corporate structure.
Like Hershey's, many major food manufacturers, including General Mills, Kellogg and Mondelez International have been cutting jobs, closing or selling plants due to decreased sales.
Hershey recently rejected a $23-billion unsolicited takeover bid by Mondelez and indicted that it was not open to discussion. (See: US chocolate major Hershey rejects $23-bn takeover bid from Mondelez)
Founded by Milton Hershey in 1894, Hershey is North America's leading manufacturer of chocolate, non-chocolate confectionary and chocolate-related grocery products.
Some of its most well known chocolate brands include Hershey's Kiss, Kit Kat, and Reese's Peanut Butter Cups, but its confectionery offerings also include gum and mint refreshment products, pantry items such as baking ingredients, toppings and beverages, and snack items such as spreads, meat snacks, bars, and snack bites and mixes.
The company markets its products under approximately 80 brand names in over 70 countries across the world.
It has had a tie-up with Cadbury since 1980 to market Cadbury's candy in the US market and the production and distribution rights for Nestle's popular Kit Kat chocolate, which Hershey holds the rights for in the US market and pays sales-based royalties to Nestle.
