PLANO, Texas -- Frito-Lay, the domestic snack food division of PepsiCo Inc., in a major restructuring designed to meet growing competition and cut corporate fat, said Monday it will reduce its work force by 1,800 people to achieve annual cost savings of $100 million.
Of the total layoffs, about 800 people will be cut from the company's headquarters in the Dallas suburb of Plano. A company spokeswoman said the job cuts will affect all layers of management and administrative staff up to the levels of vice presidents.
The company said the 'downsizing' will create a new structure more closely focused on the customer and the competition.
This is the first time Frito-Lay, regarded as one of the best managed businesses in the country, has announced such a large job reduction. About 25 percent of the reduction has already been achieved through attrition and incentives to leave the company.
'Our view of the marketplace and consumers' continual pursuit of products offering the best value forces us to take a hard look at every facet of our business and take serious action,' said Frito-Lay Chairman Roger Enrico.
Frito-Lay, which accounts for about 42 percent of the parent's profits, said the other job cuts will be from its operations across the country. After the restructuring, the company will have about 24,000 employees.
There had been considerable speculation among Wall Street analysts about the job cuts after the company hired New York's McKinsey & Co. to review operations. But most analysts had expected they would not reach more than 500.
'It certainly is larger than had been expected,' said Joseph Doyle at Smith Barney Harris Upham & Co. in New York. 'Frito-Lay is making itself a much leaner organization even though it already has roughly $4 billion in sales with 20 percent operating profit, which is very good.'
Doyle said all $100 million in projected savings will not automatically go to the bottom line but will be used to lower product prices: 'Frito-Lay will be a better value going forward.
'One of the things the consumer is demanding today is better value, which frequently means lower prices. Frito-Lay is responding to that by passing on some of the savings to the consumer and making life difficult for the competition.'
While Frito-Lay is the dominant leader in the snack food market, it has been meeting increasing competition from companies like Anheuser- Busch and Keebler.
In his prepared statement, Enrico said streamlining the organization 'makes us a more agile competitor and allows us to invest aggressively to provide unequaled product quality, exciting marketing and new product initiatives and the strongest value to consumers.'
The Dallas area headquarters staff will provide Frito-Lay's strategic direction and support, while divisional and field operations will manage its front-line business needs.
In August, the company concluded a regional restructuring of its field organization by creating four separate U.S. divisions, in Princeton, N.J.; Dallas; Atlanta; and Pleasanton, Calif., as well as 22 new marketing areas. Each division is responsible for manufacturing, service, distribution and sales and field marketing for all Frito-Lay brands.
In a separate announcement from Purchase, N.Y., PepsiCo said it will take two pre-tax charges totalling $100 million against third-quarter earnings to be announced Oct. 15. On an after-tax basis, the charges will cut into earnings by $62 million, or 8 cents a share.
Of the $100 million, $91 million will be as a result of the Frito-Lay restructuring. The other $9 million will be for costs associated with Kentucky Fried Chicken, part of PepsiCo's restaurant business.
The company said the $9 million charge is to account for the postponement of the roll-out of KFC's new Skinfree Crispy chicken product. The delay will help identify opportunities to improve profitability of the product, the company said.
PepsiCo, which employs about 300,000 worldwide, earned $1.1 billion, or $1.35 a share, on revenues of $17.8 billion last year. In the first six months this year, the company earned $523.7 million, or 65 cents a share, on revenues of $8.8 billion.
Frito-Lay last year had operating profit of $732.3 million on sales of $2.2 billion. In the 1991 six months, the company posted an operating profit of $291.2 million on revenues of $1.7 billion.
