Illinois: Kraft Heinz cuts 700 jobs in Northfield, Illinois

Kraft Heinz says it is cutting about 2,500 jobs, including more than a third of its workers at Kraft's headquarters in Northfield, as part of its plan to slash $1.5 billion in costs after the food companies combined.

Employees were notified of the staff reductions in an internal email sent this morning. Spokesman Michael Mullen said the cuts include 700 jobs in the north suburb, where Kraft Foods has been based. Mullen said the company has no plans to shut a research and development center in neighboring Glenview, which will "remain open and continue to be an important R&D facility," he said in an email.

Affected workers are in the U.S. and Canada and were to be notified in person. The company would not specify where other cuts were taking place.

The mass firing is among the biggest in metro Chicago since the recession and comes amid layoffs at the headquarters of CME Group, McDonald's , Walgreens Boots Alliance and Allstate.

Kraft Heinz said it has a total of around 46,600 employees, including about 1,900 in Northfield, prior to the dismissals. That's already down from about 2,100 from before Kraft's early July merger with Pittsburgh-based H.J. Heinz.

Significant layoffs had been expected since the company announced plans last month to move one of its two corporate headquarters to 170,000 square feet at the Aon Center in downtown Chicago from its sprawling 700,000-square-foot complex in Northfield.

In the email sent this morning to employees signed by the heads of people and performance for the U.S., Gil de Las Alas, and Canada, Michael Ferranti, employees were told the "thorough and detailed process of integrating our businesses and designing our new organization is well underway."

"The leadership team has examined every aspect of our business to ensure we are operating as efficiently and effectively as possible," the memo read. The cuts, de Las Alas and Ferranti wrote, "will better position the company to deliver on the needs of our consumers and our customers."

A GRIM DAY IN NORTHFIELD

Most employees will be notified by the end of the day tomorrow. They'll be offered benefits for a minimum of six months and outplacement assistance, according to the letter.

A source with knowledge of the cuts described a harrowing morning in Northfield. All employees with senior manager positions or lower were to be given 10 minutes with human resources and security and told whether they would keep their jobs or get a severance package. None had meetings on their calendars this morning, but all had been told to be in the building, said the source, who requested anonymity to discuss sensitive information.

The company's IT department, the source said, was told to "prepare for 800 computers to be turned in."

Kraft Heinz also will cut a number of temporary office workers and limit their use. They also will be let go by the end of tomorrow.

CUTS AND MORE CUTS

From the moment the merger was completed, the company has been in belt-tightening mode.

In a memo to employees dated July 13, Kraft Heinz CEO Bernardo Hees outlined a variety of "provisional measures" the company was taking to avoid unnecessary spending. That included instructing workers to print on both sides of paper, reuse office supplies like binders and file folders, and turn off computers before leaving the office.

Corporate donations to charities had to be approved, as did memberships in industry associations, the memo said.

At its office in Northfield, the company stopped providing free Kraft snacks like Jell-O.

The company also has instituted a series of new requirements that govern hiring. Kraft Heinz will not rehire former employees of either Kraft or Heinz, spouses of current employees or employees of other consumer packaged-goods competitors unless approved by the executive leadership team, according to a July 8 memo.

A TIGHTFISTED REPUTATION

The combination of Heinz and Kraft earlier this year was engineered by Warren Buffett's Omaha, Neb.-based Berkshire Hathaway and Brazilian investment firm 3G Capital, which has become known for its tight cost controls.

Hees—a 3G partner—had overseen cost-cutting at Heinz since the ketchup maker was taken over in 2013 through a previous partnership between 3G and Berkshire. That means the cuts announced today mostly will hit the Kraft side of the business.

Together, the two U.S. food giants own brands including Jell-O, Heinz baked beans and Velveeta that are facing sales challenges amid changing tastes. Their combination was nevertheless seen as attractive because of the opportunity to save hundreds of millions of dollars a year by combining functions like manufacturing and distribution.

Executives say they expect to save $1.5 billion in annual costs by 2017.

In a statement, Mullen said today that the job cuts were part of the process of integrating the two businesses and "designing our new organization." "This new structure eliminates duplication to enable faster decision-making, increased accountability and accelerated growth," he said.