Kellogg has announced it will take a pretax charge of approximately $35 million to restructure its North American business.
The move follows the company’s pending divestiture of selected cookies, fruit and fruit-flavoured snacks, pie crusts, and ice cream cones businesses to Ferrero – a $1.3 billion deal announced in April.
Kellogg said the reorganisation plan is designed to simplify the organisation that supports the remaining North America business after the divestiture and related transition. The overall project is expected to be substantially completed by the end of 2020.
The pretax charges include about $20 million of expenses related to employee severance and termination benefits. It has been reported that around 150 jobs will be lost.
The deal with Ferrero comprises a significant portion of Kellogg’s North American snacks business, and includes the entirety of Kellogg’s North American cookies unit, which is composed of brands including Keebler, Mother’s, Famous Amos and cookies manufactured for the Girl Scouts of the USA.
Production facilities located in US cities including Augusta, Georgia; Florence, Kentucky; Louisville, Kentucky; Allyn, Washington; and Chicago, Illinois are also included as part of the deal. It is expected the transaction will close at the end of July 2019.
In its first-quarter recent posted last month, Kellogg recorded an operating profit drop of 25.4%. On a reported basis, the company’s cereal sales in North America fell 5% as it blamed “continued category softness”, due in part to changing consumption habits as consumers switch to snack bars and other breakfast options.
However, the firm reported a 3.5% year-on-year net sales rise for the quarter to $3.52 billion, driven predominantly by acquisitions and the strong performance of its international divisions.
© FoodBev Media Ltd 2019