Hershey is expected to cut 300 jobs by the end of the year, the chocolate company announced on Friday. The cuts are to be part of a new cost-cutting, streamlining program and come after sales in China failed to meet expectations.
The company, which employs about 13,000 people globally, would not disclose specifics except for saying that manufacturing operations are not included in the plans.
“We have taken a fresh look at how our resources and people are deployed globally and are better aligning our structure to the company’s long-term strategies and goals,” said John P Bilbrey, the company’s chairman, president and CEO. “Removing cost and complexity from our business will make us more flexible to quickly react to changing consumer and competitive marketplace trends.”
Due to the job cuts, Hershey could face $100m-$120m in pretax charges. The company estimates that the move will help save $65m-$75m, mostly in 2016. A portion of the savings will be reinvested back into the company, according to the press release.
The company also updated its financial outlook for 2015. North America sales are on track, according to the company, and new product and Halloween candy orders “are solid”. The problem lies in China, where Hershey’s chocolate growth did not meet expectations in April and May.
Last year, Hershey agreed to buy Shanghai Golden Monkey Food Joint Stock Company for $584m and is expected to acquire the final 20% of its shares later this summer. “Mergers and acquisitions will continue to be an important driver of Hershey’s future success,” the company said, announcing that senior vice-president and CFO Patricia Little will now be responsible for mergers and acquisitions and corporate development.
Excluding the sales of Golden Monkey products, Hershey’s sales in China dropped by 47%. According to Hershey, the drop in sales could be partly attributed to an increase in competition in chocolate industry and growth of e-commerce.
Overall, Hershey estimates that – excluding unfavorable foreign currency exchange rates – its 2015 net sales will increase about 4%-5%, which is down from the previous estimate of 6%-7%.
To protect its chunk of the chocolate market in the US, Hershey previously sued importers of Cadbury chocolate.
At that time, Hershey spokesman Jeff Beckman said major Cadbury importers were “importing products from the UK that were not intended for sale in the United States and infringe on The Hershey Company’s brand trademark rights and trade dress”.
Yet even such bans cannot sway all consumers. According to Brooklyn-based Scottish painter Catriona Herd: “Eating Hershey’s is like a dare.”
The Associated Press contributed to this report.
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