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Food giant PepsiCo has launched a new restructuring plan: the company will be closing factories and save on employee costs to reinforce its decreasing profitability.
Profit will go down in 2019
The American company is expecting a lower growth this year: while it hopes for an organic turnover growth of about 4 %, it is also forecasting a 1 % loss in profits. The manufacturer of (amongst others) Pepsi cola, Lay’s, Quaker’s muesli and Doritos is anticipating issues with exchange rates, a slowdown in economic growth and reduced consumer trust.
Last year, PepsiCo managed to generate a turnover growth of 2 % to 64.7 billion dollars (57 billion euros) and enormous growth in profits, mostly due to a non-recurring tax advantage of 3.4 billion dollars (3 billion euros). The year before that, the exact opposite happened: the company then had to pay an additional 4.7 billion dollars (4 billion euros) to the IRS. As a result, the comparative basis for 2019 is very unfavourable.
2.5 billion for restructurings
To keep that negative trend at bay, PepsiCo will be continuing its restructurings. Brand new CEO Ramon Laguarta will be extending the reorganisation plan until 2023. He has also announced new saving measures: jobs will be cut and some factories will have to be closed. The company has not yet announced where the blows will land, but it has already set aside 2.5 billion dollars (2.2 billion euros) for the restructurings.
800 million dollars (700 million euros) will be used this year, indicating that the snack manufacturer intends to pursue its plans quickly. By comparison: last year, the company spent only 138 million dollars on the reorganisation. According to the CFO, about 70 % of that budget will go to severance pay and other staff expenses. He also expressed the company’s intention to use more automation outside of the United States.
Company stays united
Laguarta does emphasise that none of the company’s branches or departments will be closed. Neither does the new CEO see any reason to separate the snack department and the soda department – an idea suggested earlier by investors and analysts.
In the Benelux, PepsiCo has production facilities in both Belgium and the Netherlands, with 630 people working in the Dutch branch and 950 in the Belgian locations.
