Nestlé USA announced that it will exit its company-owned frozen Direct-Store-Delivery (DSD) network for its Pizza and Ice Cream businesses and will transition to a warehouse model. According to Bloomberg, this action will result in the loss of 4,000 jobs.
The company said the change will impact employees in its sales and supply chain teams and will result in the closure of eight company-owned frozen distribution centers and their frozen inventory transfer points.
“These employees have worked incredibly hard to serve our customers. Treating them with respect through this process is a top priority for us, and we are committed to doing all we can to provide them information, resources and support,” company officials said in a press release.
The phased transition will commence in the third quarter of 2019 and is expected to be complete early in the second quarter of 2020.
This change means the elimination of an delivery operation that now includes 230 facilities, 1,400 trucks and 2,000 different routes, according to Bloomberg.
“Ice Cream and Pizza are growing categories in which we hold strong leadership positions” said Steve Presley, Chairman and CEO of Nestlé USA. “As we continue to focus on driving long-term profitable growth, leveraging a simpler route to market unlocks resources we can use to fuel our efforts in demand generation, such as product innovation and brand building.”
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The food industry is facing unprecedented shifts in consumer behavior; how they eat, shop and engage with brands. At the same time, retail customers also are evolving how they do business. Nestlé is adapting to this new environment, and this transition is part of the company’s broader efforts to transform its organization to accelerate growth and win in the market.
“Moving to a warehouse model has numerous benefits for us and our retail customers,” said Presley. “By taking advantage of the unmatched breadth and depth of our existing frozen warehouse network, our retail customer partners can better leverage their existing networks. This change is a win-win for Nestlé and our customers.”
Nestle USA already uses the warehouse model for its frozen meals and snacks.
The job cuts bring one-time costs of about $500 million, the company said during a shareholder event in Arlington, Virginia.