Hershey to cut 300 jobs, struggles with growth in China
The Hershey Co. also introduces new Global Leadership Team.
The Hershey Co. is planning to cut 300 jobs by the end of 2015, as it takes steps to allow for future growth.
In an effort to drive long-term growth and increase margins, the chocolate maker is also simplifying its structure and unlocking growth potential in its core confectionery and emerging snacks businesses.
After initiating a voluntary separation for employees, Hershey will work to ease the burden of the layoffs by assisting all impacted employees during transitions to other jobs.
“We have taken a fresh look at how our resources and people are deployed globally and are better aligning our structure to the company’s long-term strategies and goals,” says John P. Bilbrey, chairman, president, and ceo, The Hershey Co. “This initiative is designed to unlock greater value across the organization by empowering decision-making closer to our customers and consumers, enabling a more enterprise-wide approach to innovation, swiftly advancing our knowledge agenda, and ensuring we effectively allocate resources to future growth areas.”
As part of this initiative, Hershey also announced changes to its Global Leadership Team to better deliver the company’s strategy, support its core business, and position Hershey to capitalize on adjacent and international growth opportunities.
Effective immediately, changes to the Global Leadership Team include:
Patricia Little, senior vp, cfo, will now also be responsible for corporate development, mergers and acquisitions. M&A will continue to be an important driver of Hershey’s future success.
Steven Schiller, regional president, AEMEA, has been named president, China and Asia. This new position elevates the company’s focus on its number one international growth priority, China.
The company has created a new Global Leadership Team role focused on growth and expansion in emerging international markets including India and those in Latin America, South America, the Middle East, Europe, and Africa. A candidate search including both internal and external individuals is in progress.
Its program is expected to generate savings of $65 million to $75 million before taxes, primarily in 2016, of which a portion will be reinvested back into the company.
While Hershey’s North America is back on track, with new product and Halloween orders bringing a necessary boost to the second half of the year, in China Hershey isn’t doing as well as it had hoped. In both April and May, the chocolate maker was unable to grow as much as it expected, and as a result it’s had to lower its expectations for organic net sales and operating income growth.
Consumers aren’t favoring chocolate in China as much as before, and competition in the market and increased use of e-commerce platforms and online purchases are driving away sales.
For the rest of the year and 2016, Hershey’s focus in China will be:
Distribution gains in smaller format stores
Core SKUs and brands that deliver the highest return
Determining the best organization structure for future growth.
The company is also moderating its full-year net sales expectation for the Shanghai Golden Monkey (SGM) acquisition.
Since a slowing economy has led to less than expected sales, Hershey will work with representatives of Shanghai Golden Monkey Food Joint Stock Co., Ltd., to reassess SGM’s value. This includes the 20 percent of outstand shares Hershey is scheduled to acquire.
Despite the setbacks in China, Hershey estimates that 2015 net sales will still increase between 2.5 and 3.5 percent, with currency exchange rates in mind. Without exchange rates factored in, net sales are predicted to be 4 to 5 percent, less than the previous estimate of 6 to 7 percent.