Reports confirm that Nestle SA’s U.S. division would be shutting down its direct-to-store delivery network for ice cream and pizza products, such as Skinny Cow and DiGiorno, starting in the third quarter.

Apparently, it could result in laying off of around 4000 workers as it stops delivering ice cream and frozen pizza directly to stores, instead making transition into a warehouse model that is becoming a new industry standard for Big Food companies looking to cut costs.

The change that was announced at a shareholder meeting in Arlington, Virginia, indicates the removal of an operation that now comprises of 1,400 trucks, 2,000 different routes, and 230 facilities.

Sources familiar with the matter informed that the Nestle’s U.S. unit employs around 48,000 people so the cuts represent around 8.3% of the workforce. Shipping straight to grocery stores was a common practice, as it gave Nestle eyes directly on the store and helped them rapidly get products to shelf.

However, as companies are looking to trim costs, it is supposedly more sensible to ship to warehouses. Nestle USA has already applied the warehouse model to its frozen snacks and meals unit.

According to company officials, the layoffs mean one-time costs of nearly $500 million for the company. As part of the change, Nestle USA will shut down its eight company-run frozen distribution centers. The modifications should be completed by the second quarter of 2020.

Sources further stated that parent company Nestle has been lowering employment level elsewhere too as CEO of Nestle, Mark Schneider, aims to strengthen profitability of the firm, which is one of the world’s largest food companies. In previous year, the company trimmed down 500 computer-service roles in Switzerland, moved some of the work to Spain, and has also removed hundreds of jobs in France including its skincare unit, besides over 300 positions in Pakistan.

Source Credit: https://www.bloomberg.com/news/articles/2019-05-07/nestle-s-u-s-unit-will-cut-4-000-jobs-in-delivery-network-shift