According to the Wall Street Journal, PepsiCo announced its intention to lay off hundreds of workers at its North American headquarters in Chicago and Plano, Texas, as well as at its Purchase, NY,-based North American beverage business in an effort “to simplify the organization so we can operate more efficiently.”
The move comes months after the CPG giant touted “outstanding” growth in the third quarter, including a 16% increase in organic seals that came in part from multiple rounds of increasingly steeper price hikes to offset higher commodity costs. The hikes include a 7% increase in the fourth quarter of last year followed by 10% and 12% in the subsequent quarters.
Despite confidence that the company could continue to raise prices as needed without fallout from the shopper, the company also is looking for other ways to manage costs as commodity prices are expected to rise through the high teens for the year and 2023 promises to be unpredictable. The layoffs and restructuring likely fall into that bucket.
Buyouts at Coca-Cola, restructuring at General Mills
PepsiCo is far from alone in its decision to reduce its workforce to offset inflation and alleviate pressure on profit margins.
Last month, The Coca-Cola Co. offered select employees in the US, Canada and Puerto Rico buyouts that will go into effect March 15, 2023. And while the company said that the offer is not an effort to cut costs but rather as part of a larger restructuring to reduce complexity and improve speed, the distinction is blurred by several rounds of layoffs and previous buyouts in 2021 and 2020.
General Mills also is in the process of eliminating hundreds of jobs by 2023 as part of a larger restructuring tied to its “Accelerate” growth strategy. The cuts were announced mid-last year when the company filed with the Securities and Exchange Commission intentions to pay $170m to $220m in restructuring costs – mostly to cover severance payments.
Food tech layoffs
Large companies are not the only ones laying off staff as a cost-savings technique or as part of larger restructurings. Beyond Meat, Motif FoodWorks and Impossible Foods have all announced layoffs, while Planterra Foods has shuttered amid weakening sales in the alternative meat segment following high trial rates early in the pandemic. Santa Barbara-based Apeel Sciences also laid off an undisclosed number of employees over the summer.
Foodservice providers also are responding to a tightening economy that has more people cooking at home rather than ordering from restaurants. Last month, food delivery provider DoorDash announced the layoffs of 1,200 corporate employees, representing about 6% of its workforce. Likewise, the celebrity chef meal prep business Wonder laid off a large portion of its staff as it rethinks its strategy in favor of potentially becoming more like a meal-kit delivery-type service.
Layoffs at retailers gain traction
Retailers also are following suit.
Last month, Amazon acknowledged rumors that it could lay off upwards of 10,000 employees in corporate and technology roles – although it did not confirm a specific number.
In October, Gopuff announced it would let go as many as 250 employees as part of a restructuring effort to cut its workforce by 10%, which also included a 3% reduction of its global workforce in March.
At a much larger scale, Walmart was one of the first dominos to topple in the recent string of layoffs across retailers. In August, it announced it was “evolving select roles” to “better position the company for a strong future,” which included laying off about 200 corporate employees in its Bentonville, Ark., headquarters and other corporate offices.
Job openings remain despite layoffs
Even as many CPG and food industry companies rethink their corporate structures and layoff employees by the hundreds, many players simultaneously are struggling to fill vacancies.
According to the Consumer Brands Association, the CPG industry has upwards of 88,000 job openings. And while CBA analysis of the November Bureau of Labor Statistics jobs report shows the industry is making progress filling these vacancies – adding just over 5,429 jobs last month and 1,624 jobs in October – the cost of doing so is notably higher.
CBA notes that wages for CPG manufacturing jobs are 5.1% higher than last year and 12. 8% higher than November 2020, with the average facility worker now earning $21.57 per hour.
Demand for higher wages and better perks extends up the chain as the gap between job openings and workers persists – adding into inflationary pressures and pushing companies to look for savings elsewhere to offset these higher expenses. These include layoffs among staff deemed non-essential, which experts predict more often than not will come from higher-paid white collar positions.