The Hershey Company (Hershey, Pa.) has announced a comprehensive, three-year supply chain transformation project that will reduce the number of its production lines by more than one-third, outsource production of low value-added items, and construct a flexible, low-cost production facility in Monterrey, Mexico. Over the three-year implementation period, the company expects to eliminate 1,500 jobs. When completed, 80% of the company's production volume will still take place in the United States and Canada.
“The changing marketplace presents both challenges and exciting opportunities for our company,” said Richard Lenny, chairman, president and CEO. “In order for Hershey to remain competitive, we are implementing a comprehensive strategic agenda focused on increasing our North American marketplace leadership and developing a truly global footprint for Hershey's iconic brands.”
"When completed," continued Lenny, "the transformation program will deliver a flexible, advantaged supply chain designed to meet a diverse range of consumer and customer needs while generating significant resources available to invest behind our strategic growth initiatives. We recognize this will involve considerable change over the next three years, and intend to make this transformation of our supply chain as smooth as possible for our employees and customers."
The company estimates the program will incur pre-tax charges and non- recurring project implementation costs of $525 million to $575 million over the next three years. This estimate includes $475 million to $525 million in pre-tax business realignment charges and approximately $50 million in project implementation costs.
"This supply chain program," said David J. West, Executive v.p. and COO, "was developed following an extensive assessment of Hershey's manufacturing capabilities, future growth expectations, and the investment needed to achieve these expectations. We expect to make steady progress with the program over the next three years. The long-term benefits will include a significant, sustainable increase in investment behind Hershey's iconic brands and new product innovation, as well as targeted, profitable international expansion. We recently announced a manufacturing joint venture in China with Lotte Confectionery Company, another step in our disciplined global expansion."