Pepsi to cut 3% of workforce; Chinese staff said to be unaffected

Source: Want China Times

In a media briefing held on Thursday this week (Feb 9), PepsiCo, the world’s largest snack-food maker, announced that it will shed 3% of its global workforce, cutting staff by 8,700, as part of a plan to save US$1.5 billion by 2014.

On the same day, PepsiCo made public its profit figures for the fourth quarter of 2011, reporting a 3.7% year-on-year rise to US$1.41 billion. Total revenue for 2011 also increased by 15%, from US$57.8 billion in 2010 to US$66.5 billion. Annual operating profits also saw an increase of 16%, to US$9.6 billion.

Despite improved performance indicators, PepsiCo CEO Indra Nooyi warned that 2012 will be a “transitional year” due to continued uncertainty in the global economy. She expects the company’s profitability to take a step back this year.

PepsiCo’s production costs have risen sharply since last year, with increases in the price of sugar and the costs of packaging and transportation. These changes are believed to be fueling the company’s decision to downsize its workforce.

Pepsi China responded on Friday by saying that the forthcoming restructuring will not affect its food and beverage staff in China. Concerns over redundancies were also raised in November last year, when Pepsi China sold its bottling operations to a joint venture between Taiwanese beverage maker Tingyi and Japanese counterpart Asahi. At the time, group vice president Tai Xiangmei assured staff that their jobs and salaries would not be affected within the next two years.

Pepsi China’s performance in the beverage market has failed to match expectations in recent years. According to public data, its beverage operations incurred losses of US$45.5 million in 2009 and US$175.7 million in 2010. Although Tai indicated at the end of last year that Pepsi China enjoyed double-digit growth in sales and profits during the second quarter of 2011, she refused to respond to speculation over whether that data had been skewed, only re-emphasizing the impact the rise in production costs is having on the industry as a whole.

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