Nestle’s US unit to slice 4,000 jobs in latest delivery change

Bloomberg

Nestle SA’s US unit will dismiss about 4,000 workers as it stops delivering frozen pizza and ice cream directly to stores and transitions to a warehouse model that’s becoming an industry standard for Big Food companies looking to trim costs.
The company said that it’s shutting down its direct-to-store delivery network for products like DiGiorno and Skinny Cow beginning in the third quarter. The change, announced at a shareholder event in Arlington, Virginia, means the elimination of an operation that now includes 230 facilities, 1,400 trucks and 2,000 different routes.
The unit was able to reduce costs but ultimately, the direct-to-store model was too expensive even once the company “reached the maximum point of efficiency,” Steve Presley, chief executive officer of Nestle USA, said in an interview. “You can’t have that duplicative cost in the structure.”
The US unit employs about 48,000 people,
according to a spokeswoman, so the cuts represent about 8.3 percent of the workforce.
Shipping directly to grocery stores used to be more common, as it gave suppliers like Nestle eyes on the store and helped them quickly get products to shelf. But as companies look to cut costs, it often makes more sense to ship to
warehouses. Nestle USA already uses the warehouse model for its frozen meals and snacks.
“Every inch of the freezer is controlled very tightly,” he said. “As retailers have become more sophisticated, as the retail industry has consolidated some, that
bit of Wild West where you could kind of move and push your competitor to
the side, that’s not the case anymore.”
The job cuts bring one-time costs of about $500 million, the company said in slides presented to investors. As part of the transition, Nestle USA will
close eight company-owned frozen distribution centres. The change should be complete by the second quarter of 2020.