Kellogg to close cereal plant?

by Eric Schroeder
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BATTLE CREEK, MICH. — The Kellogg Co. said it will have “no choice” but to close at least one U.S. cereal plant in the “very near future” if it is unable to come to terms with the Bakery, Confectionary, Tobacco and Grain Millers (B.C.T.G.M.) Union.

Kellogg submitted a Memorandum of Agreement (M.O.A.) to the B.C.T.G.M. late last year that was not ratified when voted upon by union members in December. According to Kellogg, the M.O.A. would have addressed the immediate needs of the company’s cereal business and would have guaranteed jobs at its cereal plants for at least the next four years.

“Kellogg Co. is committed to the long-term health of our cereal network in the U.S.,” the company said in a statement issued Feb. 2. “For many years, employees at our cereal plants have been making high-quality, nutritious foods so people can have a better start to their day. And we want them to continue doing so for many years to come.

“However, given the current environment, that’s become increasingly difficult. The cereal category continues to decline — not just for us, but for our competitors — and that leaves Kellogg with far more production capacity than we need in our U.S. cereal network.”

Kellogg is not the only company that has had to make tough decisions on facility closings. Last fall, Minneapolis-based General Mills, Inc. announced plans to close its ready-to-eat cereal plant in Lodi, Calif., as part of its larger Project Century effort.

For its part, Kellogg said it has spent “a considerable amount of time” evaluating its U.S. cereal plants in Memphis, Tenn.; Omaha; Battle Creek; and Lancaster, Pa., and also has considered expansion opportunities at its Belleville, Ont., plant. In December, Kellogg closed its R.-T.-E. cereal plant in London, Ont.

“We’re at a pivotal fork in the road,” the company said. “We must ensure that we are operating the right number of plants — in the right locations — to better meet our current and future production needs, and the evolving needs of our retail customers.

“However, Kellogg will have no choice but to announce the closure of at least one U.S. cereal plant in the very near future if our challenges continue to go unaddressed. This is absolutely not what we want, but we must make changes to remain viable.”

Between October 2013 and July 2014 Kellogg was embroiled in a lockout at its Memphis R.-T.-E. cereal plant. At the time Kellogg said it was facing “significant challenges” in ready-to-eat cereal and the Memphis plant was not set up for long-term success. Ultimately, a federal judge ordered Kellogg to end the lockout.

Prior to issuing its public statement on Feb. 2, Kellogg sent a letter to its R.-T.-E. cereal employees urging them to ask union leaders for another opportunity to vote on the proposed M.O.A.

“While we firmly believe that we can build a sustainable future for this business, we must take steps now to begin that process,” Kellogg said in the letter to employees. “We must reinvest in the business through innovation and brand building if we hope to sustain it, or ever turn it around. And if we can achieve the cost savings necessary for reinvestment through means other than plant closures then we all win.”
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