Kellogg cuts 100 jobs – does it know something Woolworths doesn’t?

Kellogg is closing up shop in Charmhaven, Australia. The world’s leading cereal company announced this week that it’s shutting down its Charmhaven snacks plant, as well as a ready-to-eat cereal plant in Ontario, Canada.

The move isn’t isolated, and comes as part of a larger “Project K” strategy to optimize efficiency and effectiveness over the next four years. “As with any project of this scope and one that impacts people, these are difficult decisions,” said John Bryant, President and CEO, Kellogg Company. “We are very mindful of the impact these changes will have – particularly to our employees. As our employees and others would expect from Kellogg, we will help those who are impacted through their transitions.”

While the Australian plant will be shut down by the end of 2014, putting around 100 Aussies out of a job, plans are in the works to expand the company’s Rayong, Thailand, cereal and snacks plant by early 2015.

Global versus local

Outsourcing is nothing new, and Kellogg’s strategy may improve its business and save jobs in the long-run. But food retailers like Woolworths (ASX: WOW) have shown that supporting local jobs and companies may actually pay off. When the company decided to support local fruit producing company SPC Ardmona (a Coca-Cola Amatil (ASX: CCL) subsidiary), it saw sales shoot up 38% nationwide. In some fruit-growing areas, revenue rocketed a whopping 124% in just three months.

Foolish takeaway

Woolworths has shown that local can pay off, but Kellogg isn’t Woolworths. The company has always been international, and Aussies have never had much reason to assume that its products were processed domestically. While the plant closure stings for the 100 workers that lost their job, Kellogg will likely see little to no fallout from its closure decision.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.


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