CHICAGO -- Kraft Heinz on Wednesday said it will lay off 700 workers at Kraft's corporate headquarters in suburban Chicago, part of a cost-cutting plan that will lower the combined company's head count in the U.S. and Canada by 2,500 jobs.
Employees affected by the cuts, which have been expected for months, will get severance benefits that last at least six months as well as outplacement services, said Michael Mullen, Kraft Heinz's senior vice president of corporate and government affairs. The cuts take effect immediately.
"As we work to build something special at the Kraft Heinz Company, the leadership team has examined every aspect of our business to ensure we are operating as efficiently and effectively as possible," Mullen wrote in an email. "We have developed a new streamlined structure for our organization to simplify, strengthen and leverage the company's scale. This new structure eliminates duplication to enable faster decision-making, increased accountability and accelerated growth."
Kraft employed about 2,000 people in suburban Chicago before the layoffs.
H.J. Heinz completed its purchase of Kraft Foods Group in July, forming Kraft Heinz, now the third-largest food and beverage company in the U.S. and the fifth-largest worldwide.
A few weeks later, Kraft Heinz announced it would move one of its headquarters, which encompasses 700,000 square feet in suburban Chicago, to less than a quarter of that amount of space in downtown Chicago. Kraft's lease downtown, which starts Jan. 1, is for 170,000 square feet over five floors.
Its other headquarters is in Pittsburgh.
On Monday, Kraft Heinz affirmed its commitment to cut costs by $1.5 billion by the end of 2017. As part of its merger, the company said it expected to reduce its workforce, according to documents filed with the Securities and Exchange Commission. Many of Kraft's top executives left the company after the merger was finalized.
Also Monday, the company reported sales declines at both its Kraft and Heinz units for the second quarter that ended in June, before the merger took effect. In announcing those results, Kraft Heinz Chief Executive Officer Bernardo Hees said: "The company is focused on the difficult and challenging process of integrating our two businesses. We have a lot of hard work ahead of us as we continue to design our new organization, always putting our consumers first."
Changing tastes, as consumers move away from processed foods to healthier, fresher fare, are creating challenges for companies such as Kraft Heinz. At the same time, many shoppers remain price conscious, putting additional pressure on food companies to trim costs while promoting the value of their brands. Heinz, best known for its ketchup, has said it plans to increase distribution of Kraft Macaroni & Cheese in international markets.
Last month, Kraft Heinz told workers to limit travel, keep the cost of meals at $50 to $70 when traveling, limit printing to "only when absolutely necessary" and find ways to reduce the company's use of electricity and other utilities, according to a memo obtained by the Chicago Tribune.
Heinz cut more than 7,000 jobs -- about 20 percent of the workforce -- in the 18 months after it was acquired in 2013 by Berkshire Hathaway and private-equity firm 3G Capital.
Other snack companies cutting costs include Mondelez, which was created in 2012 when Kraft split into two public companies. The maker of Mini Chips Ahoy and Oreo cookies said last month that it will cut half of its 1,200 jobs at a bakery in Chicago over the next year, as it moves some of its production to a plant in Mexico.
A day after the announcement, Mondelez said second-quarter profit fell nearly 35 percent to $406 million on revenue of $7.66 billion, which was down more than 9 percent from the same period a year ago.
Business on 08/13/2015