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Diving Brief:
- Del Monte Pacific Limited closes three canned vegetable production facilities, resulting in the layoff of 188 full-time employees and 656 seasonal employees, a shift to what executives call a "bottom-up strategy" , said a company spokesman at Food Dive.
- The Sleepy Eye facilities in Minnesota and Mendota, Illinois, will close by June 2020, the company announced to Food Dive. A plant in Crystal City, Texas, closed on Tuesday and the company plans to sell another one in Cambria, Wisconsin. Production will move from closure facilities at six US production facilities to Del Monte.
- "This decision is difficult and came after careful consideration," the company said in a statement to Food Dive. "This restructuring is a necessary step in order for us to remain competitive in a rapidly changing market, and our strategy, which relies on an insufficient asset strategy, will enable more efficient and less costly operations."
Insight on diving:
The closures announced this week were caused by Del Monte's parent company, Del Monte Pacific Limited, based in Singapore. The consolidation aims to "fully utilize the capacity of its existing production facilities and to focus more on growth and brand innovation," the company said in a press release.
For several years, Del Monte has been looking for growth opportunities outside the can. The company's 133-year-old executives, under the direction of CEO Greg Longstreet, have expressed concern over not taking advantage of lucrative opportunities, as they were so focused on maintaining their dominance in the lineup. canned products that did not grow.
It is also facing financial difficulties due to lower margins, which is partially offset by Trump administration tariffs on steel and aluminum imports. The canned product manufacturer is making efforts to offset these increases by improving operational efficiency and reducing costs, according to a report on the results. Plant closings and sales will go a long way in streamlining operations and improving results. Del Monte told Food Dive that there were no other sales or divestments planned in addition to those announced this week.
In order to better position itself to exploit consumer trends such as nibbling, convenience and healthy eating, the canned fruits and vegetables company – should not be confused with Florida-based Fresh Del Monte Produce who sells fresh fruits and vegetables. in 1989 – expanded its offering by introducing frozen and refrigerated products for the first time and moving into other areas of the grocery store, such as delicatessens.
Other companies have removed jobs and closed factories in the search for savings. Last year, General Mills announced plans to cut 625 jobs to reduce costs and improve the performance of its yogurt and bakery brands. TreeHouse Foods has cut hundreds of jobs in recent years by closing factories, as well as offices in Omaha, Nebraska and St. Louis. Nestlé takes a more aggressive approach by closing one of its global factories each month to streamline operations.
Although it is currently a popular approach to cost reduction, there is no evidence that this strategy is as effective as businesses expect. Kraft Heinz has cut more than 1,200 jobs in 2016 and 2017 as part of its goal of eliminating 5,150 jobs. The company continues to face declining demand for many products in its portfolio as consumers flock to healthier, cooler and more natural brands. In addition, General Mills experienced several quarters of disappointing sales, even after making significant reductions in staff numbers.
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