ConAgra Foods announced major restructuring plans on October 1 that include elimination of approximately 1,500 jobs, or approximately 30% of the company’s global office-based workforce, and relocation of corporate headquarters from Omaha, Nebraska, to Chicago, Illinois.
Layoffs and other cost cutting measures were described as components of an “efficiency plan” designed to improve profitability, advance growth and maximize shareholder value. This action excludes any impact from the planned divestiture of the private label operations, and plant positions will not be eliminated in connection with this restructuring.
Beginning in the summer of 2016, approximately 700 employees will be located at the new headquarters offices in Chicago’s Merchandise Mart. Among them will be the company’s senior leadership team and certain personnel from the Consumer Foods business unit, currently located in Omaha and Naperville, Illinois.
“We will retain a major presence in Omaha, where we have deep roots,” assured ConAgra Foods CEO Sean Connolly, who announced on October 1 that corporate headquarters will relocated to Chicago. “We are making difficult, but necessary, decisions to enhance productivity, drive standardization and enhance flexibility to deliver improved profitability. And through our organization redesign, we will better harness the power of our front line by deploying our talent against our largest opportunities for future growth and value creation,” said Sean Connolly, ConAgra’s president and chief executive officer.
He continued: “Locating our headquarters and our largest business segment in Chicago places us in the heart of one of the world’s business capitals and consumer packaged goods centers, enhancing our ability to attract and retain top talent with a focus on brand building and innovation.”
At the same time, the company will continue to maintain a significant presence in Omaha, including approximately 1,200 employees within key administrative functions, as well as research and development and supply chain management.
The diversified foods company, which is a major producer of frozen products for retail and foodservice markets in North America and beyond, hopes to realize at least $300 million worth of efficiency benefits within the next three years through a combination of reductions in selling, general and administrative expenses, and enhancements to trade spend processes and tools.
Cost savings of approximately $200 million are expected to be derived from a combination of “lower headcount and non-headcount costs which will be achieved by aggressively embracing zero-based budgeting, simplifying organizational structure by increasing spans of control and reducing layers, and outsourcing technology and back office functions to improve scalability,” the company stated in a press release.
ConAgra expects its plan to provide a modest benefit to fiscal year 2016 earnings. More than half the savings are anticipated to be realized by the end of fiscal year 2017, with the balance achieved in fiscal year 2018. These savings are in addition to the approximately $150 million in cost reductions achieved over the past two years and are expected to enhance competitiveness, margins and agility, while also providing fuel for future brand-building and innovation initiatives.
The company estimates it will incur total non-recurring charges of approximately $345 million, substantially all of which are expected to be cash charges, over the next two to three years in connection with the restructuring.
