CHICAGO: Kraft Foods Inc said it will eliminate 6,000 jobs, or 6% of its workforce, and close 20 plants worldwide over the next three years. The restructuring follows more than a year of disappointing sales and earnings for the biggest US food company.
About 1,300 salaried positions in North America would be eliminated in the first quarter, with the remaining cuts occurring by 2007, the maker of Oreo cookies, Jell-O desserts and Oscar Mayer hot dogs said.
The cuts were disclosed in Kraft’s fourth-quarter earnings released on Tuesday, which detailed the company’s latest earnings disappointment: a 7% drop in profits from a year earlier to US$869mil, and a warning that 2004 earnings would also be lower than expected.
The job cuts had been expected since the company shook up its top management last month and announced other changes after several quarters of sluggish sales, particularly for cookies and pizza.
Kraft chief executive Roger Deromedi, who was given sole control of the company last month when co-CEO Betsy Holden was removed from that post and put in charge of global marketing, had signalled his intent to take the company in a different direction to try to snap out of the slump in sales and new products.
On Jan 8, he reorganised Kraft’s business units and said it would take a more global focus in a strategy aimed at making it more nimble.
”While Kraft’s fourth-quarter results were in line with our expectations, we clearly are not satisfied with our performance in the quarter or for the full year,” Deromedi said.
“The corrective actions we began in late 2003 are showing progress, and the stronger steps we are announcing today will get us back on track for sustainable growth,” he added.
The company anticipates the restructuring will result in pre-tax charges of as much as US$1.2bil over the next three years and generate an estimated US$400mil in annual savings by 2006.
Kraft has about 50,000 employees in the United States and slightly more than 100,000 worldwide.
At the same time it is laying off employees, Deromedi also said the company would spend US$500mil to US$600mil more on marketing in 2004. He said Kraft intended to focus on healthier snacks and other new products, stronger marketing and a better strategy to meet consumers’ health and wellness concerns.
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