Dive Brief:
- WK Kellogg Co. will close its Omaha, Nebraska, cereal plant and lay off 550 employees. It will also cut back on production at its Memphis, Tennessee, facility starting in late 2025 as the cereal maker streamlines its supply chain, the company announced Tuesday.
- The company said the plan, which is projected to cost between $450 million and $500 million, will also include boosting production at its Michigan, Pennsylvania, and Ontario, Canada facilities.
- The restructuring of the Rice Krispies maker comes after it reported a 2.7% drop in Q2 sales from the prior year. The overall cereal category declined 2% in the quarter, CEO Gary Pilnick said on WK Kellogg’s earnings call.
Dive Insight:
WK Kellogg believes the manufacturing transition will allow it to boost production and cut costs, according to the CEO. He told investors the company’s new supply chain will be more reliable and resilient.
“The best way to think about this is we're shifting production from the oldest facilities to more efficient facilities and also from old platforms that are more rigid to newer, more agile technologies,” Pilnick said.
WK Kellogg made its debut as a standalone company almost a year ago, bringing legacy brands such as Frosted Flakes and Apple Jacks under the control of a cereal-focused entity. The business is facing pressure as it looks to increase sales growth in a category facing a long-term decline.
The space has seen demand dwindle for years as consumers cut back on sugar and carbohydrates, two attributes long associated with cereal, in favor of protein-laden foods and more portable options.
CEO Pilnick told sister publication Food Dive last fall his company would focus on “premiumization” to drive growth in cereal. WK Kellogg has recently introduced better-for-you offerings such as Special K Zero and Eat Your Mouth Off, a puff cereal containing 22 grams of protein per serving.
In WK Kellogg’s earnings call Tuesday, Pilnick said both the company and the cereal category’s “innovation performance is down.” He pointed to private label offerings gaining market share as consumers cut back on their spending. Pilnick teased new product launches this year and in 2025.
“Innovation is an important driver to the category, and when a consumer is looking for more certainty, the innovation just is not performing as well as it has in the past,” Pilnick said.
The executive said 9 of its 11 brands gained share this year. Still, WK Kellogg Co’s market share of the cereal category has stayed around its current figure of 28%. But the company reported year-over-year volume declines in the last quarter of 4.8%, which Pilnick attributed to lower-than-expected consumption of Special K.
The cereal giant’s supply chain announcement follows similar moves from food and beverage giants this year, including PepsiCo and Campbell Soup, as companies look for ways to cut costs while dealing with cash-strapped consumers purchasing less of their products. Last week, the owners of Sara Lee and Wonderbread, Flowers Foods and Bimbo Bakeries USA, respectively, announced they would close plants and slash hundreds of jobs.
