Kellogg Co. reportedly will be leaving its direct store delivery network this year, suggesting that closures and layoffs are on the way for the company’s distribution centers.
The Battle Creek, Mich.-based manufacturer plans to start moving away from its DSD network in the second quarter of 2017 and move its U.S. snacks business to the warehouse model already used by its Pringles brand and some of its other businesses, the Battle Creek Enquirer reported. The move is expected to be completed by the fourth quarter this year.
The transition is expected to reduce the "complexity and cost structure while driving growth and profitability for the company and its retail partners," Kellogg’s said this week before its Q4 earnings call Thursday, the Enquirer reported. Inventory at its DCs will be transferred to retailers’ warehouses before the centers are closed.
"The consumer and retail landscape continues to change," John Bryant, Kellogg's chairman and CEO, said in a statement. "We have to change the way we reach and communicate with consumers. Because our customers' and our own warehouse distribution systems have become more efficient and effective, we can now redeploy resources previously tied to DSD and direct them to the kinds of brand investments that drive greater demand with today's consumers − ultimately growing our business and our retailers' businesses."
Bryant called the move a "difficult decision" because of its impact on employees. Last month, the company announced it planned to cut 250 North American jobs, most at its headquarters in Battle Creek, the Enquirer reported..