While manufacturers are enjoying the increased demand for CPG products – rising by 8.7% in the second quarter, according to the Consumer Brands Association – the reality is this has caused additional pressure on the supply chain. Across the F&B industry, there has been widespread inflation due to higher costs of raw materials, labour and freight.
In a virtual presentation for the Consumer Brands Association, Kellogg’s North America President Chris Hood said the company has struggled to keep up supply because of shortages of factory line workers and truck drivers.
Plans to reshuffle production
As such, the Frosties, Rice Krispies and W.K. Kellogg by Kids maker is embarking on a long term strategy designed to help offset inflation, increase productivity and reinvest in its core brands.
The project is expected to be completed by early 2024, with estimated cumulative pre-tax charges of approximately $45m, along with an approximate cash cost of $25m, according to a filing with the US Securities and Exchange Commission.
Kellogg’s is also setting aside $4m to cover ‘employee-related costs, including severance and other termination benefits’. The restructuring plan involves shifting production of various products to optimal lines across the supply chain network. Although the company said this will not cause production facilities to close, it will result in laying off over 200 workers at its Battle Creek, Michigan, facility by the end of 2023.