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Pepsi plans to cut 8,700 jobs, estimates savings of $1.8 billion

By Andrew Moran     Feb 9, 2012 in Business
New York - PepsiCo Inc. officially announced that it plans to cut 8,700 jobs, or approximately three percent of its workforce. It will also increase marketing spending by about $600 million. This restructuring is estimated to save the company $1.5 billion by 2014.
Digital Journal reported last month of the New York Post exclusive that revealed PepsiCo was considering laying off 4,000 employees from its global workforce of 300,000. It also included a possible elimination or reduction in its pension contributions.
Well, more than one month later, the company announced that it is laying off more than double the number.
According to a press release, PepsiCo, the maker of Tropicana Juice, Gatorade sports drinks and Dorito chips, stated that it is cutting 8,700 jobs, which is about three percent of its entire workforce. The announcement came as the company reported its fourth quarter numbers, which were better than expected – shares fell by 2.7 percent, though.
The massive job cuts come as the company looks to offset high ingredients costs and increased marketing spending in North America on products such as Pepsi, Mountain Dew and the aforementioned drinks.
Similar to its competitors, Pepsi is facing higher costs for its products as well transportation and packaging. In order to offset the soaring costs, companies have made the decision over the past year to raise prices. However, that has not worked, which led them to initiate cost-cutting measures.
“In a volatile global environment over the past five years, PepsiCo has delivered double-digit compound annual growth in core net revenue, 8 percent compound annual growth in core EPS, and returned about $30 billion to shareholders in the form of dividends and share repurchases,” said Indra Nooyi, PepsiCo Chairman and CEO.
“Our goal is to continue on that earnings trajectory over the next 5 to 10 years, fully recognizing that we need to make changes in how we operate to address the challenges we identified in the review process. 2012 will be a transition year, in which we will be taking the appropriate steps to build a stronger, more successful company going forward.”
In any typical year, Pepsi adds between 10,000 and 15,000 jobs.
Officials expect this latest restructuring will save the company approximately $1.5 billion over the next three years.
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