Hershey to Cut 15% of Global Workforce
01 Mar 2017 --- Chocolate giant Hershey is cutting around 15% of its global workforce in a jobs cull that is expected to help the company’s new “Margin for Growth” program aiming to boost profit margins by reducing administrative expenses and improving the supply chain.
The jobs losses are understood to relate to Hershey’s hourly staff outside of the US. Currently the company employs approximately 19,000 full timers and 1,650 part time employees around the world.
A company-sponsored investor conference in New York will take place later today where new CEO Michele Buck will talk about taking office and details initiatives designed to drive continued net sales, operating profit and earnings per share-diluted growth.
In a statement, the incoming president and CEO says: “Hershey has tremendous assets – its iconic brands, remarkable people and a history of executional excellence – that position the company well to deliver top- and bottom-line growth.”
"We're making progress against the 'Margin for Growth' related initiatives that should give us the flexibility to invest in certain parts of our business. Our objective is to ensure that we always have the right level of innovation, marketing plans and consumer and customer expertise to drive net sales growth, especially in our North America confectionery and snacks business.”
“In addition, we're working to return our international businesses to profitability as soon as possible. Combined, these efforts should enable the company to achieve its adjusted operating profit margin target of about 22% to 23% by year end 2019.”
Hershey’s also plans to continue to make investments to grow its core confectionery business and expand its breadth across the snackwheel by capturing new usage occasions and participating in on-trend categories.
The "Margin for Growth" program is designed to improve overall operating profit margin through supply chain optimization, a streamlined operating model and reduced administrative expenses, with savings primarily being achieved in 2018 and 2019.
These actions are intended to increase efficiency, leverage global shared services and common processes and increase capacity utilization, say Hershey, which also anticipates the program to result in “total cumulative pre-tax charges of $375 million to $425 million, including one-time employee separation benefits of $80 million to $100 million.”
The portion of non-cash program costs are expected to be between $200 million to $225 million. Cash savings are expected to reach an annual run-rate of between $150 million to $175 million by year end 2019.
Over the long term, the company expects annual constant currency net sales growth of 2% to 4%, driven primarily by its North America business. This update, according to Hershey, versus the previous outlook, reflects changes in U.S. shopping habits and continued macroeconomic challenges impacting growth in international markets. Given the scale advantages of the company's North America business and the "Margin for Growth" related initiatives, the company expects to generate long-term adjusted earnings per share-diluted growth of 6% to 8%.
by Gaynor Selby
