Cereal maker Kellogg announced Monday plans to cut seven percent of their workforce, or 2,000 jobs by 2017 as part of a four-year cost-saving plan after a decrease in North American sales.
According to Reuters, the program, known as "Project K," will cost between $1.2 billion to $1.4 billion and generate annual cash savings of $425 million to $475 million in 2017, the Battle Creek, Michigan-based company said in a statement.
Kellogg had about 31,000 employees as of Dec. 29, according to regulatory filings.
"We are making the difficult decisions necessary to address structural cost-saving opportunities which will enable us to increase investment in our core markets and in opportunities for future growth," Kellogg CEO John Bryant said in a statement. "These actions will set a foundation for our sustainable growth operating principle."
According to Yahoo Finance, Kellogg and competitors such as JM Smucker Co., Kraft Foods Inc. (KRFT) and ConAgra Foods Inc. have struggled to get sales up due to unemployment and an "unbalanced economic uncertainty."
For the quarter, Kellogg Co. said it earned $326 million, or 90 cents per share. A year ago, the company earned $318 million, or 89 cents per share. Revenue slipped to $3.72 billion and was short of the $3.73 billion analysts expected.
More than 90 percent of U.S. households buy cereal, according to General Mills Inc. data. North American net sales fell 1.3 percent to $2.4 billion in the quarter, while the U.S. snacks business declined by 2.5 percent. Latin America net sales rose 3.4 percent while European sales advanced 6.4 percent.
"It's not worth discounting if you're not driving volume," Brian Yarbrough, an analyst for Edward Jones & Co. in St. Louis, said, according to Yahoo Fiancé. "So you've got to retrench, you've got to look for cost savings, you've got to look for ways to be more productive, whether its through the supply chain or manufacturing."
