Kellogg's Shutters Ontario Plant Due to Changing Consumer Taste, More Than 500 Canadian Workers to Lose Jobs

It would be a bleak Christmas 2013 for over 500 workers of Kellogg's in London, Ontario, Canada, who were informed on Tuesday morning that the plant would soon close and they would lose their jobs.

The bad news was delivered at a meeting at Four Points Sheraton. The employees had an inkling of the dark days ahead since Kellogg's announced in November that it would lay off 20 per cent of its workers at the London facility.

The 89-year-old plant manufactures ready-to-eat cereals such as Corn Flakes, All-Bran and Muslix. However, changing consumer taste has led to a drop in sales of breakfast cereals people who are too busy to sit down for the first meal of the day now prefer more convenient food such as muffins or yogurt, causing a 2.2 per cent decline in Kellogg's U.S. sales of breakfast cereal.

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Those who still buy breakfast cereals also prefer more natural and organic cereal, leaving traditional cereals made by Kellogg's that are high in sugar content on grocery shelves.

Besides the closing of the Canadian factory, Kellogg's, headquartered in Michigan, will also shutter an Australian snack facility, but expand a Thailand plant as part of its four-year global retooling strategy.

The Kellogg's union had anticipated the closure when the company's Canadian unit invested in 2011 $43 million to upgrade the plant in Belleville, Ontario, with Ontario taxpayers contributing $4.5 million to the expansion.

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Kellogg's pending closure is part of the continuous loss of manufacturing jobs in Ontario the past 12 months after H.J. Heinz and Smuckers also closed their food processing plants in the Canadian province. Over 33,000 jobs in the factory sector has been lost in Ontario, even as Lance Canada bakery in Cambridge is scheduled to shutter in May 2014 and shed 130 jobs, while Kraft Foods Group is also slated to close its Oakville factory.

Other factors that contributed to the closure of the Kellogg's Ontario plant are high energy and labour cost, strong Canadian currency, and border-crossing rules.

Kellogg's registered a 1.7 per cent cut in its Q3 operating profit in November due to its poor sales in the U.S., which could not be compensated by the boost in its sales in Latin America by 6.7 per cent, in Europe by 3.3 per cent and in Asia by 2.9 per cent.