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.

Kraft employees brace for big layoffs as Heinz merger nears

While no one at the Northfield, Illinois-based company will say how many of Kraft's 22,000 employees are likely to be out of a job after it merges with H.J. Heinz as soon as July 2, judging by what the new owners did when they took the ketchup-maker private, the layoffs will be swift, proceed in waves and cut deeply.

When Brazilian private-equity firm 3G Capital and Warren Buffett's Berkshire Hathaway bought Pittsburgh-based Heinz two years ago, they cut about 400 headquarters employees, or about a third of the company's corporate staff in Pittsburgh, within the first six months. If they follow the same playbook in Northfield—which seems likely, insiders say—as many as 700 of Kraft's 2,300 local employees could be out of a job by the end of the year.

That would be the largest mass dismissal locally since 5,600 Dominick's employees lost their jobs in December 2013 when the supermarket chain closed all of its stores. Before that, American Airlines cut 987 jobs in 2012 as part of a bankruptcy reorganization, according to state data.

Kraft Heinz, whose products will include a basket of grocery staples from Oscar Mayer meats and Kraft Macaroni & Cheese to Heinz ketchup and Ore-Ida Tater Tots, will be run from Pittsburgh and the Chicago area, the companies have said, though they have not said which functions will be retained here. Kraft has been struggling to boost sales and profit since it split from Deerfield-based Mondelez International in late 2012.

This year's cuts likely would be only the start.

Kraft and Heinz project annual cost savings from the combination to reach $1.5 billion by the end of 2017, which executives said would be achieved through increased scale, operational efficiencies and cost reductions. While neither company publicly has acknowledged layoffs as part of the mix, Kraft CEO John Cahill told employees in a video shortly after the merger was announced that “cost-cutting will be a focus. I do want to be candid.” And the combined company's prospective CEO, Bernard Hees, told Kraft employees in April that “change is never easy.”

LOOK TO PITTSBURGH

That certainly has been true in Pittsburgh.

Since 3G and Omaha, Neb.-based Berkshire Hathaway closed the Heinz deal in June 2013, the company has slashed more than 7,000 jobs, a component of ruthless cost-cutting measures that helped boost its 2014 profit to $657.1 million, according to the company's annual report filed in March. In its first full year under new ownership, Heinz's managers cut expenses by 19 percent through restructuring, layoffs, plant closures in the U.S., Canada and Europe, and other initiatives aimed at generating $250 million in annual savings.

“When 3G and Berkshire take an ownership stake, they reduce costs, and that almost always includes significant layoffs,” says Wade Pierson, founder of staffing firm Impact Talent Ventures in Medford, N.J. “It's pretty widely known among the circles of folks in my business and others who cover the (industry) that they're coming, but what we don't know yet is how many and what positions.”

At Heinz, the layoffs came in several waves and included workers at every level. The first cuts came about six weeks after the deal closed and took out some 600 workers in Heinz's North American operations, including about 350 office workers in Pittsburgh. Five months in, the new company had cut a total of 2,000 corporate and field positions through the closure and consolidation of manufacturing facilities and corporate offices. Weeks after those cuts had concluded, Heinz announced it would close three plants in North America and dispatch about 1,350 more employees.

Buyouts and layoffs continued in 2014. By the end of last year, Heinz had 24,500 employees worldwide, down from 31,900 when the company announced its takeover by 3G and Berkshire Hathaway in April 2013.

Because Heinz already has been through the efficiency wringer, it's likely that the preponderance of cost-cutting and layoffs will target the Kraft side of the business, analysts and company insiders say.

MAKING THAT LIST

Those cuts are likely to target positions in corporate functions like human resources, accounting, finance and marketing. They could include members of sales teams who call upon the same accounts as their new colleagues at Heinz. There also could be efforts to streamline distribution and possibly production, raising the specter of plant closures, or “manufacturing rationalization” as it's known in industry parlance.

“Across the board, obviously, 3G has shown a penchant of taking a more heavy hand with regards to operating costs, and we think they will employ that stringent focus when looking at the combined operating cost structure of Kraft and Heinz together,” says Erin Lash, an analyst at Morningstar in Chicago. “Like other (consumer packaged goods) companies, Kraft has been working to streamline costs even prior to this announcement, but we expect those efforts will occur at an even more pronounced level when the businesses are combined.”

Senior teams from Kraft and Heinz have been meeting regularly since the merger was announced in March to identify areas of overlap between the two food giants, but they have not disclosed plans to anyone outside senior and executive level teams, sources say. No job cuts are expected before late August, insiders say, but some midlevel workers have begun independent job searches ahead of potential layoffs, staffing firms, current and former employees say.

Pierson, the staffing firm executive, says that in combinations involving companies as large as Kraft and Heinz, executives from both companies “are literally mapping out each department, each position and trying to figure out where there's overlap and where do certain (workers) fit within the (merged) company.”

In addition to layoffs, Pierson says, a significant number of workers likely will be asked to take on new roles, potentially in different locations. “There will certainly be disruption, but these are both well-managed companies.”

COMMITTED TO CHICAGO

Michael Mullen, a Heinz spokesman, cautions that many details about the new organization have not yet been determined. “This includes finalizing and announcing the new leadership team who will lead the company and integration of Kraft and Heinz,” Mullen says in an email. “Our priority will be to communicate with all employees openly, honestly and often throughout this process.

"Many things will stay the same, and we remain committed to our hometowns with our co-headquarters in Pittsburgh and Chicago.”

While Heinz CEO Hees will lead the new company, the remainder of the Kraft Heinz executive team has not been identified. The new team “will lead the new company including the ongoing integration efforts,” says Basil Maglaris, a Kraft spokesman. In a regulatory filing yesterday, Kraft says Heinz executives have spoken with some members of Kraft's senior management team about remaining with the combined company following the merger. (Cahill, for instance, will stay on in a diminished role as vice chairman.) Kraft says no other final decisions have been made.

Kraft's shareholders are expected to approve the combination in a meeting scheduled for July 1. The companies expect the transaction will close as soon as the next day.

“It's important to note that, until the transaction is closed, we remain two independent companies,” Maglaris says. “The work being done now is led by an integration team comprised of both Kraft and Heinz executives, including Kraft senior leaders representing every function and discipline in the company. They're gathering information to ensure a seamless transition, including critical details to inform the longer-term structure of the company and value-creation opportunities.”

Kraft to cut 1,600 jobs in U.S., Canada

(Crain's) — Kraft Foods Inc. said it will cut 1,600 positions in the U.S. and Canada as it prepares to split into two companies. The processed food maker employs 46,500 people worldwide, which means the layoffs will reduce headcount by 3.5%.

Kraft also said it expects its fourth-quarter earnings to total $1.95 a share, with operating earnings at $2.28 a share, a penny more than it had forecast. The company said "organic revenue" rose 6.5% in the period, thanks to mid-single digits increases in North America and Europe and double digits in developing markets. The company had predicted organic sales growth at 6%. Kraft plans to formally report fourth-quarter results on Feb. 21.

The Northfield-based company will reorganize its domestic sales team, consolidate its U.S. management centers and trim the corporate and business units. About 40% of the cuts will be in sales, and about 20% will come from eliminating positions that already are vacant.

"When we announced our decision to create two world-class companies last August, we said both would be leaner, more competitive organizations," Kraft Chairman and CEO Irene Rosenfeld said in a statement. "For the past year, the North American team has been working to streamline operations to deliver sustainable top-tier performance and continue to invest in our iconic brands.”

Kraft will cut its U.S. management offices from four locations to two once the North American grocery company is spun off later this year.

Kraft's Glenview management center will close by the end of 2013 and Kraft's 440-employee beverage business in Tarrytown, N.Y., and its Planters unit in East Hanover, N.J., will move to the Chicago area by December 2012. Employees of the two East Coast units will have the option to transfer to the future company headquarters.

Kraft has two facilities in Glenview, the management center and a research and development complex; together they employ 1,378 people.

The headquarters of the global snack company will be based in the Chicago area at a site under consideration, the company said in the statement. The North American regional headquarters for the global snack company will be in the East Hanover campus.

"Having the majority of our business units together in one location will provide greater development opportunities for our people and will help us continue building our brands more efficiently and collaboratively," Tony Vernon, president of Kraft Foods North America and CEO of the future grocery company, said in a statement.

(Ms. Rosenfeld will become CEO of Kraft's international snack business.)

The company's Madison, Wis., management center which has 1,542 employees will continue as the site for its Oscar Mayer unit. Kraft also will retain operations in the Toronto area where it employs 2,864 employees.

“We finished 2011 with strong business momentum in each of our geographies," Ms. Rosenfeld said in announcing financial results. "Our virtuous cycle of investment continues to pay off around the world, despite a difficult operating environment. We expect our 2011 results will place us solidly among the top-tier of our peer group, and we remain on track to launch two industry-leading companies in 2012."

Kraft’s snack business will continue to use a direct store delivery model. The North American grocery company will contract local sales to Acosta Sales & Marketing for grocery and mass retail channels. Crossmark will continue to serve the grocery company in convenience stores.

Most of the U.S. retail sales employees will move to the North American region of the global snack company. The company expects to have both sales organizations complete by April 1.