Dive Brief:
- McCormick & Co. is cutting jobs as part of its efforts to save $75 million in 2023, the company said during its fourth-quarter earnings call.
- Lawrence Kurzius, McCormick’s CEO, said his business is making “considerable progress on the streamlining actions we have underway.” He said the company is rolling out a voluntary retirement program, which ”will be followed by other actions, some of which will be involuntary.”
- McCormick is the latest CPG company in the food and beverage space to announce a restructuring of its workforce as a way to cut costs and boost profits.
Dive Insight:
McCormick has been one of the largest beneficiaries of the growing demand for different flavor options and healthier foods by consumers, many of whom started doing more cooking at home during the COVID-19 pandemic and kept the practice up. But the flavoring giant has been hit especially hard by outside challenges that have forced it to make changes in how it does business.
“[W]e navigated a dynamic global environment including persistently high cost inflation and supply chain challenges, significant disruptions in China related to COVID, and the conflict in Ukraine,” Kurzius said in a statement.
Job cuts have become a popular measure in the recent past for companies across nearly all sectors of the business economy, including food and beverage, to bring costs down.
Coca-Cola announced in November it’s planning to restructure its North American workforce through a “voluntary separation program” that will include employee buyouts.
PepsiCo is laying off workers at the headquarters of its North American snacks and beverages divisions, according to reporting in The Wall Street Journal. And plant-based meat companies Beyond Meat and Impossible Foods, as well as ingredients behemoth International Flavors & Fragrances, have laid off workers or announced plans to streamline their businesses.
A McCormick spokesperson said the company is “still reviewing options to streamline the organization” and that it hasn’t yet announced how many jobs would be cut or when it would be disclosed. McCormick currently employs about 14,000 people globally, according to its website.
McCormick also is turning to automation as a way to trim its workforce and improve efficiency, a similar practice being implemented in other sectors such as meat and poultry. These initiatives are expected to reduce 10% of the company’s supply chain workforce in the Americas, Kurzius said on the earnings call.
In its recent earnings report, the Maryland-based spices and flavorings company highlighted the financial impact the broader economy is having on its business. It forecast earnings to be between $2.42 and $2.47 a share in 2023, compared to $2.52 a year earlier. During its fourth quarter, revenue fell 2% to $1.7 billion.
Similar to other CPGs, McCormick has turned to price increases, which the company said are only now beginning to catch up to the pace of inflation.
Companies such as McCormick are not only responding to current business challenges but preparing their operations for the uncertainty that lies ahead — even if the underlying demand for their offerings remains strong.
Krishnakumar Davey, president of client engagement at IRI, told Food Dive he discussed procurement and supply chains with top CPG executives. He was surprised to hear the rather dire outlook they gave for this year.
“They said ‘Look, [2023] is going to be as volatile as [last] year and the last couple of years,’ ” Davey recalled. “I was quite taken aback by what they said.”
