One of Wal-Mart Stores’s largest suppliers ConAgra Foods announced a major restructuring underway at this time. CEO Sean Connolly said Friday that the company will lay-off 1,500 office-based employees around the globe and it will also move its corporate headquarters from Omaha to Chicago.
The restructuring effort will not affect manufacturing plant positions but it comes on the heels of the food company’s divestiture of its private label business unit.
The corporate layoffs will include approximately 30% of ConAgra’s office-based workforce. Connolly said these cuts will produce an estimated $200 million in lower overhead costs. The company also said it expects to realize an estimated $100 million in efficiency benefits from improvements to its trade spend processes and tools. Beginning in the summer of 2016, approximately 700 employees will be located to new offices in Chicago’s Merchandise Mart, including the company’s senior leadership team and certain functions of the consumer foods business, which are currently located in Omaha and Naperville, Illinois.
The company will continue to maintain a presence in Omaha, including approximately 1,200 employees within administrative functions, as well as research and development and supply chain management.
“Today’s announcements are important milestones as we continue to execute against our strategic plan to build a focused, higher-margin, more contemporary and higher-performing company,” Connolly said. “We are making difficult, but necessary, decisions to enhance productivity, drive standardization and enhance flexibility to deliver improved profitability.”
Connolly added that moving ConAgra’s headquarters to Chicago will improve its ability to attract and retain “top talent with a focus on brand building and innovation.” The company expects the plan to provide a modest benefit to fiscal year 2016 earnings. More than half the savings are anticipated to be realized by the end of fiscal year 2017 with the balance achieved in fiscal year 2018.
ConAgra estimates it will incur total non-recurring charges of approximately $345 million, substantially all of which are expected to be cash charges, over the next two to three years in connection with the restructuring.