The chocolatier based in Pennsylvania and other makers of food have struggled recently with the ever-changing habits of eaters in the U.S. and a slowdown in economic growth across emerging markets including the world’s most populous country China.
Hershey said approximately 2,700 jobs would be cut, with most of them hourly employees who do not work in the U.S. The company said this would help it gain an adjusted operating profit margin up to 23% by 2019 year end, in comparison to the 20% it had for 2016.
Hershey, as of the end of 2016, had approximately 16,300 fulltime and 1,679 part time employees globally.
Some analysts are expecting that many of the job cuts will occur in China, where the company’s overhead costs climbed since its acquisition of a candy business there during 2014.
That acquisition came about the time the economy in China slowed and rivals of Hershey also pushed hard into the country as well.
The Reese’s peanut butter cups and Kisses maker has branched out over the past few years, buying a brand of beef jerky and creating new protein drinks as it attempts to expand from just the candy aisle.
However, with sales moving up just 0.7% in 2016, Hershey is now looking for more ways to make its profit margins better and to justify remaining an independent entity.
In 2016, Mondelez International, the maker of Oreo cookies, attempted to acquire Hershey saying it could help the chocolate maker expand internationally. The deal was rejected by Hershey and eventually Mondelez’s pursuit of a takeover ended.
Just over a month later, CEO of Hershey at the time, J.P. Bilbrey announced his resignation. Incoming CEO Michele Buck will give her vision for Hershey on Wednesday to investors.
Analysts are watching to see if the latest job cuts will be deep enough to offset persistent slow growth across the food industry as well as underperformance across China.
Several food makers slashed spending over the four years since 3G Capital the private equity company based in Brazil started on a cost-cutting move after its acquired H.J. Heinz which merged later with food maker Kraft Foods Group.
Mondelez has shuttered or sold over 40 plants, while Kellogg said after 18 months of strict budgeting protocols it has cut out and chopped up its waste.
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