Faced with changing market demand in recent years, Kellogg Company split up its businesses into two separate entities in 2023. It tasked one of these new companies, WK Kellogg Co, with focusing exclusively on reinvigorating the company’s slowing cereal business. Today, WK Kellogg Co is working toward positioning itself as a leading manufacturer, marketer and distributor of branded ready-to-eat cereal in the United States, Canada, and Caribbean. 

As part of this charge to reinvigorate its iconic portfolio of cereals, WK Kellogg recently announced additional details of its strategic priority to modernize its supply chain, including planned capital investments focused on enhancing supply chain effectiveness and efficiency, production shifts from the oldest plants to other facilities, and consolidation of its manufacturing network.  
      
Under the plan, the company will invest approximately $450 to $500 million on supply chain modernization efforts, which includes capital expenditures of up to $390 million and one-time cash restructuring and non-restructuring costs of approximately $110 million.

According to Gary Pilnick, Chairman and Chief Executive Officer, “regarding modernizing our supply chain marks a significant step forward in executing our strategy and enhancing WK Kellogg Co’s long-term strength and resilience. These actions will help transform our supply chain and will allow us to enhance our production across a more reliable, agile and cost-effective manufacturing network, supporting top-line delivery and driving margin expansion.” Industry observers suggest this supply chain modernization will continue to improve upon customer service expectations to remain competitive in the industry. 

WK Kellogg will invest up to $500 million over the next three years to update its supply chain as it pursues increased production output and improved profit margins, according to a Q2 2024 earnings call. Pilnick expects a more consolidated supply chain will better position the company to “compete effectively,” particularly when it comes to financial performance and improved profit margins. He notes that WK Kellogg’s supply chain modernization effort is the centerpiece of our margin expansion program.

The cereal maker behind Frosted Flakes and Raisin Bran will spend $390 million on new equipment and infrastructure as part of the plan, with the remaining $110 million consisting of a one-time cost to execute the initiative, according to Pilnick.

Shifting production capacity also is a priority for the company, as it plans to shutter a cereal plant in Omaha, Nebraska, while streamlining operations at a site in Memphis, TN, and increasing production at other facilities. Dave McKinstray, WK Kellogg Chief Financial Officer, says the company will lay off 550 people due to the consolidation. The company expects to phase out production at the Omaha plant by the end of 2026 and to begin reducing output from the Memphis facility later next year, according to a securities filing.

According to Pilnick, WK Kellogg is already making progress toward its supply chain goals, with the company highlighting its overall equipment effectiveness, consolidated Mini-Wheats production and expansion of its Belleville, Ontario, facility in an earnings presentation. Says Pilnick: “When you think about what we’re doing, I think what you should have in your head is production shifting more than anything else, shifting from our oldest facilities to more efficient facilities and from older, more rigid platforms to newer, more agile ones.”

Related Articles:

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