Kellogg’s Shares Slip as Cereal-Plant Workers Go on Strike
Kellogg’s Shares Slip as Cereal-Plant Workers Go on Strike
(Bloomberg) -- Kellogg Co.’s shares slipped as workers at its U.S. cereal plants went on strike, the latest move by unions to seize upon a nationwide labor shortage to press their case for higher pay and improved benefits.
The strike was called by about 1,400 workers at plants in Omaha, Nebraska; Battle Creek, Michigan; Lancaster, Pennsylvania; and Memphis, Tennessee. Those locations produce cereals including Rice Krispies, Raisin Bran, Froot Loops, Corn Flakes and Frosted Flakes.
Kellogg is threatening “to send additional jobs to Mexico if workers do not accept outrageous proposals that take away protections that workers have had for decades,” the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union said in a statement Tuesday. It said the workers “have been working long, hard hours, day in and day out, to produce Kellogg ready-to-eat cereals for American families“ during the Covid pandemic.
Kellogg said it is “disappointed by the union’s decision to strike.” The maker of Frosted Flakes said its pay and benefits are “among the industry’s best” and that it has offered the union increases to both. The average 2020 earnings of union workers was $120,000, the company said in an emailed statement.
Kevin Bradshaw, a local union vice president in Memphis who has worked at Kellogg for more than 20 years, said that base pay at his plant is roughly $58,000 a year, but last year’s figure was inflated by pandemic-driven overtime.
“We worked seven days a week, 12 to 16 hours a day,” Bradshaw said.
Shares of Kellogg fell 0.8% to $64.02 at the close of trading, erasing a gain earlier in the day. This year, the stock has advanced 2.9%, short of the S&P 500’s 16% rise.
The strike shows how U.S. workers are pressing for better pay as a labor shortage and unprecedented supply-chain bottlenecks force companies to hike prices and make deep operational changes. Employees at essential plants, like those run by packaged-food companies, have faced difficult conditions since the start of the Covid-19 pandemic.
Last month, Nabisco workers in five states ratified a new labor contract following a strike that had slowed production of Oreo cookies and Triscuit crackers.
Issues Amplified
Jennifer Bartashus, an analyst with Bloomberg Intelligence, said that concerns about shortages are widespread following the upheaval of the pandemic, which has led to limited supply of everything from chicken wings to freezers.
“The concern here is about the potential for supply chain issues to be amplified if the company is unable to maintain production levels,” Bartashus said. “Depending on how long a strike lasts, it will affect how much completed inventory will need to be used to meet their current obligations, and then how long it will take to rebuild that inventory once the strike is resolved.”
Last month, Kellogg announced a North America reorganization plan for its supply chain in a bid to increase productivity. The strategy is to optimize output by shifting production without closing any plants, according to the company’s statement from Sept. 3. The project, which is expected to be mostly completed by early 2024, will help to offset cost inflation and will result in cumulative pretax charges of about $45 million.
Kellogg said it anticipates employee-related costs from the plan to total approximately $4 million, including severance and other termination benefits.
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