Kraft Foods Inc. said Tuesday it will eliminate 6,000 jobs, or 6 percent of its work force, and close 20 plants worldwide over the next three years as part of a restructuring that follows more than a year of disappointing sales and earnings for the biggest U.S. food company.
About 1,300 salaried positions in North America will be eliminated in the first quarter, with the remaining cuts occurring by 2007, the maker of Oreo cookies, Jell-O desserts and Oscar Mayer hot dogs said.
The moves were disclosed in Kraft's fourth-quarter earnings release Tuesday, which detailed the company's latest earnings disappointment: a 7 percent drop in profits from a year earlier to to $869-million, and a warning that 2004 earnings will also be lower than expected.
The job cuts have been expected since the Northfield, Ill., company shook up its top management last month and announced other changes after several quarters of sluggish sales.
Chief executive Roger Deromedi, who was given sole control of the company last month when co-CEO Betsy Holden was removed from that post and put in charge of global marketing, had signaled his intent to take Kraft in a different direction.
On Jan. 8, he reorganized Kraft's business units and said it would take a more global focus in a strategy aimed at making it more nimble. The job cuts associated with the shakeup were not disclosed until Tuesday.
Three plants to be included initially are in Canton, N.Y., Farmdale, Ohio, and central Europe, the company said, without elaborating.
The company anticipates that the restructuring will result in pretax charges of as much as $1.2-billion over the next three years and generate an estimated $400-million in annual savings by 2006.
Kraft has about 50,000 employees in the United States and slightly more than 100,000 worldwide.
At the same time Kraft is laying off employees, Deromedi also said the company will spend $500-million to $600-million more on marketing in 2004. He said Kraft intends to focus on healthier snacks and other new products, stronger marketing and a better strategy to meet consumers' health concerns.
"Low-carb diets like Atkins and South Beach, the focus on transfats, concerns about obesity and increased demand for organic and natural products are requiring a shift in how we market and what we market," he told analysts at a meeting in New York.
But company executives also bear some of the blame for Kraft's woes, he acknowledged _ raising prices last year in response to rising costs while misjudging the extent to which consumers have become more price-conscious.
Net earnings for the last three months of the year amounted to 50 cents a share, matching the consensus estimate of analysts surveyed by Thomson First Call. That compared with a net profit a year earlier of $931-million, or 54 cents a share.
Revenues grew to $8.3-billion from $7.8-billion, up 6 percent thanks to a boost from the weak dollar.
Citing the restructuring, Kraft lowered its estimate for 2004 earnings to a range of $1.63-$1.70 per share. Analysts were forecasting $2.01 per share.
For the full year, net income was $3.48-billion, or $2.01 per share, up 2 percent from $3.4-billion, or $1.96 per share, in 2002. Revenues climbed 4 percent to $31-billion from $29.7-billion.