Hershey Co. (NYSE:HSY) plans to eliminate 15% of its global workforce as part of its new leadership's effort to boost profitability over the next two years.
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The Pennsylvania chocolatier and other food makers have struggled in recent years with changing eating habits in the U.S. and slower economic growth in emerging markets including China.
Hershey said the roughly 2,700 job cuts, mostly hourly employees outside the U.S., will help it reach an adjusted operating profit margin as high as 23% by the end of 2019, compared with 20% in 2016. Hershey had about 16,300 full-time and 1,680 part-time employees world-wide at the end of last year.
Some analysts expect many of the job cuts to take place in China, where overhead costs have climbed since Hershey acquired a candy company there in 2014. The acquisition came just as China's economy slowed and Hershey's rivals also made a big push into the country.
The maker of chocolate Kisses and Reese's peanut butter cups has branched out in recent years, buying a beef jerky brand and creating protein drinks in an effort to grow beyond the candy aisle.
But with sales only inching up 0.7% last year, Hershey is looking for ways to improve its profit margins and justify its independence. Last year, Oreo cookie maker Mondelez International Inc. attempted to buy Hershey, arguing that it could help Hershey expand internationally. Hershey rejected the deal, and Mondelez ended its pursuit.
Less than two months later, Hershey's Chief Executive J.P. Bilbrey said he would step down. Incoming Chief Executive Michele Buck is expected to describe her vision for the company to investors on Wednesday. Analysts will be watching whether the cuts appear deep enough to head off persistently slow growth in the food industry and underperformance in China.
Many food makers have slashed spending in the four years since Brazilian private-equity firm 3G Capital embarked on an aggressive cost-cutting crusade after buying H.J. Heinz Co., which later merged with Kraft Foods Group Inc.
Mondelez said it has closed or sold 40 factories. Kellogg Co. said that after a year and a half of stringent budgeting protocols, it has "chopped and cut all the waste." General Mills Inc. said its adjusted operating margin will hit at least 18% this fiscal year, even though sales are worse than expected.
Earlier this month, Kraft Heinz Co.'s $143 billion bid for Unilever, which the Anglo-Dutch company rejected, suggested that 3G's partners are willing to make a deal for a company whose profit margins aren't up to par with Kraft Heinz's. That raises pressure on rivals like Hershey and Mondelez that want to avoid becoming a takeover target to improve profitability on their own.
Anne Steele contributed to this article