PepsiCo announces cuts in global workforce
Feb. 9, 2012
NEW YORK — PepsiCo, Inc. has announced a series of strategic investment and productivity initiatives that involve increasing marketing and advertising by about $500 million to $600 million in 2012 and cutting 3% of its global workforce over the next several years.
“In a volatile global environment over the past five years, PepsiCo has delivered double-digit compound annual growth in core net revenue, 8% compound annual growth in core e.p.s., and returned about $30 billion to shareholders in the form of dividends and share repurchases,” said Indra Nooyi, chairman and chief executive officer of PepsiCo. “Our goal is to continue on that earnings trajectory over the next 5 to 10 years, fully recognizing that we need to make changes in how we operate to address the challenges we identified in the review process. 2012 will be a transition year in which we will be taking the appropriate steps to build a stronger, more successful company going forward.”
The increase in advertising and marketing will be primarily in North America, and the company said it expects to maintain or increase that rate of support as a percentage of revenue.
The multi-year productivity program is expected to generate about $1.5 billion in incremental cost savings by 2014 through various optimization efforts, including a reduction of 8,700 global employees. Other productivity initiatives include leveraging new technologies and processes across operations, go-to-market and information systems, heightened focus on best practice sharing across the globe, and consolidating manufacturing, warehouse and sales facilities.
The company also expects to improve its net return on invested capital by at least 50 basis points annually beginning in 2013. Additionally, there are plans to enhance returns to shareholders in 2012 through a 4% increase in its annual dividend beginning with the June 2012 payment and the execution this year of a share repurchase program of $3 billion.
“As we implement our strategic priorities in 2012, we’ve had to make some tough decisions,” said Hugh Johnston, chief financial officer. “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 e.p.s. growth.”