LONDON, Ont. – After nearly 90 years in London, Ont., Kellogg Co. will shut the doors of its cereal plant by the end of next year, cutting more than 500 full-time jobs.
Employees were told of the plans during a staff meeting Tuesday, about a month after the company announced a restructuring plan that would have laid off 110 workers by January.
Union president Bob Martin said workers were taken aback by the news, given that they had been working with Kellogg to lower costs.
“It was pretty shocking for us considering all the work we’ve done over the last several years,” said Martin, who represents Local 154G of the Bakery, Confectionery, Tobacco Workers and Grain Millers Union.
Martin said the union was told the plant was old and expensive to maintain, and that new equipment would be needed to upgrade production.
But Martin was doubtful that another plant could replicate the production from London, which makes 27 different varieties of cereal, including Corn Flakes, Frosted Flakes and Raisin Bran.
The plant has been reducing its the volume of cereal it produces, faced with declining sales in a market that has shifted its breakfast preferences to shakes and cereal bars over the traditional morning bowl of cereal. While Kellogg’s has moved into the new markets, most of its profit comes from its cereal division.
Kellogg’s has been in London since 1924. Last month it said it was making cuts as part of an overall restructuring effort to streamline operations by 2018.
Premier Kathleen Wynne, who is also Ontario’s minister of agriculture and food, said she was “disappointed” by the decision.
“. . . I extend my support to the affected employees and their families,” Wynne said.
“The government will make sure this community receives the resources they need at this challenging time and will deploy specific programs, such as the Rapid Re-employment and Training Service, as required.”
Brian Yarbrough, an analyst with Edward Jones, said the decision to close the London plant is in line with the company’s announcement in November that there would be changes as a result of too much capacity, especially in North America.
“They have too many plants and they’re not operating efficiently enough,” he said. “There’s an opportunity to probably close a couple of plants and move that production into others.”
U.S.-based Kellogg Company had sales of $14.2 billion in 2012, making it the world’s leading cereal company as well as second largest producer of cookies, crackers and savory snacks. The 100-year-old company has plants in 18 countries and sells them in more than 180.
John Bryant, president and chief executive of Kellogg Company, said the decision to close the London plant was difficult.
“We are very mindful of the impact these changes will have — particularly to our employees,’ he said in a statement.
Martin said the next steps for the union would be to negotiate severance and retirement packages and focus on retraining, and meet with the company to see if there was any way to improve costs and keep the plant open.
But he didn’t hold out much hope for Kellogg’s to stay in London.
“We thought we were actually going to (discuss cost improvements) in January, this came out of the blue,” Martin said.
“If there’s any way that we can change things, that’s completely out of our hands. We were already prepared to (meet to discuss ways to reduce production costs) and it didn’t make a difference.”
In addition to the closure in London, Kellogg’s also announced it was shutting down its snacks plant in Charmhaven, Australia by late 2014 and expanding its cereal and snacks plant in Rayong, Thailand by 2015.
Kellogg’s announcement is the latest in a series of manufacturing closures in Ontario.
Last month, food producer Heinz announced it was closing its tomato plant in Leamington, Ont., eliminating 740 full-time jobs.
Eric Hoskins, Ontario’s minister of economic development, expressed disappointment over the Kellogg’s closure Tuesday as well as concern for the affected employees.
“Our government is committed to making resources available to help displaced workers in this challenging time,” Hoskins said in a statement.