Food jobs at risk as Kraft merges with Heinz

A car stops at the security shack to the main entrance to Kraft's corporate headquarters in Northfield, Illinois, U.S., on Tuesday, Jan. 19, 2010. Cadbury Plc agreed to an improved 11.9 billion-pound ($19.7 billion) offer from Kraft Foods Inc., ending more than four months of resistance and creating the world's largest confectioner. Photographer: Tim Boyle/Bloomberg News

A car stops at the security shack to the main entrance to Kraft's corporate headquarters in Northfield, Illinois, U.S., on Tuesday, Jan. 19, 2010. Cadbury Plc agreed to an improved 11.9 billion-pound ($19.7 billion) offer from Kraft Foods Inc., ending more than four months of resistance and creating the world's largest confectioner. Photographer: Tim Boyle/Bloomberg News

Published Jun 5, 2015

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Noah Buhayar, Craig Giammona and Jeff Green Seattle and New York

This MAY not be the easiest time for Kraft Foods employees to be looking for work.

As a merger with HJ Heinz approaches, they are bracing for job cuts as competitors retrench amid slow sales growth.

“Most of these large food companies are not hiring,” Brian Yarbrough, an analyst at Edward Jones, said. “They’re in cost-cutting mode.”

Heinz chief executive Bernardo Hees will probably root out expenses at the combined company, just as he did at the tomato sauce maker, helping it produce some of the best margins among big US food manufacturers.

Since 2013, he has cut jobs from the management ranks to the factory floor, creating a more valuable business for Heinz’s owners, Warren Buffett’s Berkshire Hathaway and investment firm 3G Capital.

The success of that approach has put competitors on notice in an industry where the pressures are clear. The top 25 US food and beverage companies as a group lost market share over the past five years to private-label producers and smaller firms, missing out on about $18 billion (R220.24bn) in sales, according to a February report from Robert Moskow, an analyst at Credit Suisse Group.

Speciality items

Food industry job openings tended to be at companies that relied on small staffs and guerrilla marketing, often selling specialty items that were not a strength at the major companies, said Doug Ehrenkranz, a recruiter for Boyden Global Executive Search in Houston.

“We’ve finally gotten to the point where there’s nowhere left to move and make big food,” said Ehrenkranz, who previously worked at Procter & Gamble and PepsiCo.

Even before the Heinz deal was announced in March, Kraft had shuffled management to address the industry’s challenges. Tony Vernon, who led the company after its split with Mondelez International in 2012, left in December. Current chief executive John Cahill took over, promising to take a “fresh look” at the business and prioritise investments.

Kraft announced the departure of top marketing, finance and research executives in February. The company, known for Oscar Mayer cold cuts, Maxwell House coffee and Miracle Whip, had about 22 100 employees as of late December, a decrease of approximately 400 from a year earlier.

Still, the merger with Heinz came as a shock, according to interviews with current and former Kraft employees who asked not to be identified to protect business relationships. The company had fired executives in March and April as the food maker reorganised divisions, two of these people said.

Former Kraft employees said Heinz would have an easy time finding places to cut when the companies combined. They described a bureaucracy where marketing executives, for example, oversaw teams of redundant support staff.

Capped spending

When Berkshire and 3G bought Heinz in 2013, they immediately installed a new senior leadership team that capped spending on office supplies and meals during business trips.

They also started eliminating both white- and blue-collar jobs, shuttering factories in North America, and offering buyouts to staff in the company’s hometown, Pittsburgh.

Buffett has left operations to 3G, which was co-founded by Brazilian billionaire Jorge Paulo Lemann.

“Efficiency is required over time in capitalism,” Buffett said at Berkshire’s annual meeting in Omaha, Nebraska, last month. “I really tip my hat to what the 3G people have done.”

Heinz had the “utmost respect” for the Kraft brands that its employees had established, Michael Mullen, a spokesman for the company, said.

“The merger is an exciting time for staff at both companies, which will have a brighter future together,” he said.

Kraft spokesman Basil Maglaris said the combination of brands and talent would build a stronger company.

Pinpointing the exact job losses in the food industry is tough, because the largest companies have been acquiring and divesting businesses as their customers turn to more natural or organic foods. Still, Campbell Soup, ConAgra Foods, Kellogg and Mondelez shed more than 6 000 jobs combined in their most recent financial years for which data are available. – Bloomberg

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