US: PepsiCo to cut 8,700 jobs in revamp
PepsiCo is to cut around 8,700 employees as part of a cost saving strategy designed to restore shareholders' confidence by freeing up funds for key brands.
The savings programme, announced today (9 February), is expected to generate US$1.5bn of incremental cost savings by 2014, PepsiCo said. The projected job cuts represent around 3% of its global workforce.
The announcement is the result of PepsiCo's comprehensive review of its portfolio, brands, costs, organisation and capital structure. The soft drinks giant rejected calls from some analysts to split its business, but it has been under intense pressure to create more value for shareholders.
The productivity savings are expected to span "every aspect" of PepsiCo's business, involving the consolidation of manufacturing, warehouse and sales facilities, the implementation of "simplified organisation structures", and "fewer layers of management", the group said.
"As we implement our strategic priorities in 2012, we've had to make some tough decisions," said PepsiCo's CFO, Hugh Johnston. "As a result, 2012 will be a year of transition, one in which we will make the right investments to position PepsiCo properly to achieve long-term high-single digit core constant currency EPS growth."
Alongside the cuts, PepsiCo plans to increase advertising and marketing spend on its global brands by $500m to $600m this year, with particular focus on North America. The snacks and beverage giant said it expects to "maintain or increase" that rate of support as a percentage of revenues, going forward.
This morning, PepsiCo also released its full-year results, reporting a 2% increase in net profits for the 12 months to the end of December, to US$6.46bn. Profits were boosted by "successful pricing and productivity programmes" during the year.
Operating profits climbed by 16% on 2010 to $9.63bn. Net sales in the period increased by 15% to $66.50bn.
In the fourth quarter, net profits amounted to $1.40bn, a 3% increase on the prior year, while operating profits edged up by 1% to reach $2.25bn. Sales in the period climbed by 11% to reach $20.16bn.
PepsiCo Americas Beverages' net sales grew by 8% for the year, but its operating profits fell by 4%. In North America, price rises offset volume declines in soft drink sales as the company lost volume market share to The Coca-Cola Co.
For 2013, the company as a whole is targeting high single-digit profits growth, after a transition year in 2012, in which it expects profits to fall by 5%.
For the cost savings announcement, click here.
For the results statement, click here.
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