PepsiCo recently announced it would close its plant in Kansas City, just the latest move by the company as it goes through a major restructuring effort.
Rockhurst University professor Anthony Tocco said the age of the Kansas City facility likely influenced the decision. “They’ve used these buildings for years and years and the equipment for years,” he said. “Somewhere else will now manufacture them. They’re probably newer plants. They can do it with more efficiency and less cost.”
KC's Pepsi plant closure “devastating” to workers
The plant closure is part of a broader strategic shift by PepsiCo expected to cost hundreds of millions of dollars in severance pay alone. PepsiCo announced a four-year restucturing plan in a recent filing with the Securities and Exchange Commission. The company expects to the plan to cost $2.5 billion through 2023, with 70 per cent of that earmarked for severance and other employee costs. The company is also planning to close more factories, which is expected to incur an additional 15 per cent in costs over plant closures and “related actions.”
The plan is being spearheaded by new CEO Ramon Laguarta, who took over at PepsiCo in October 2018. In a recent earnings call he stated his priorities are “becoming more capable, leaner, more agile and less bureaucratic.”
Laguarta also said that PepsiCo was “relentlessly automating and merging the best of our optimized business models with the best new thinking and technologies.” While he did not get into the details, he mentioned supply chain agility, an increased reliance on data to improve demand forecasting, and advanced robotics and automation.
This isn’t a desperation move by a company in trouble—PepsiCo posted positive earnings for last year, and remains one of the top food product companies in the world. But company leadership clearly sees the direction that manufacturing technology is going in and doesn’t plan on being left behind.
In fact, Laguarta sees the company’s market dominance as an opportunity to incorporate more advanced manufacturing in its operations. “Our ability to leverage the scale of our business to invest in and deploy new capabilities and technologies is a competitive advantage,” he said. “We're transforming the machine, the operating machine of PepsiCo with technology and data.”
In the meantime, though, workers in communities like Kansas City will suffer the brunt of the move towards automation—and will face tough choices in securing their own futures.
Read more about the changing manufacturing landscape at Video: GM is Turning a Profit. Why the Layoffs?.