Dive Brief:

• Del Monte Pacific Limited is closing three production facilities that produce canned vegetables, resulting in layoffs of 188 full-time employees and 656 seasonal employees, in a transition to what executives call an "asset-light strategy," a company spokesperson told Food Dive.
• Facilities in Sleepy Eye, Minnesota and Mendota, Illinois will shut on or around June 2020, the company told Food Dive. A facility in Crystal City, Texas closed Tuesday and the company plans to sell another in Cambria, Wisconsin. Production will transition from the closing plants to six U.S. Del Monte production facilities.
• "This decision is difficult and has come after careful consideration," the company said in a statement to Food Dive. "This restructuring is a necessary step for us to remain competitive in a rapidly changing marketplace. Our asset-light strategy will lead to more efficient and lower cost operations."

Dive Insight:

The closings announced this week were brought on by Del Monte’s parent company, Singapore-based Del Monte Pacific ­Limited. The consolidation is intended to "fully utilize the capacity of its existing production facilities and increase its focus on branded growth and innovation," the company said in a press release.

For several years, Del Monte has looked outside the can for growth opportunities. Executives at the 133-year-old business, under the leadership of CEO Greg Longstreet, had expressed concern they were missing out on lucrative opportunities because they were so focused on maintaining their dominance in the canned product line that was not growing.

​It's also facing financial hardship from lower margins that are partly being squeezed by the Trump administration’s tariffs on steel and aluminum imports. The canned produce manufacturer is working to offset these increases by improving operational efficiencies and reducing costs, according to a recent earnings report. The plant closures and sales will go a long way toward streamlining its operations and helping improve its bottom line. Del Monte told Food Dive there are no other sales or divestitures planned beyond those being announced this week.

In an effort to better position itself to tap into consumer trends such as snacking, convenience and healthy eating, the canned fruit and vegetable company — not to be confused with Florida-based Fresh Del Monte Produce, which sells fresh fruits and vegetables and was spun off in 1989 — is expanding its offerings as it introduces frozen and refrigerated products for the first time and moves into other parts of the grocery store, such as the deli.

Other companies have cut jobs and shuttered plants as they search for savings. Last year, General Mills announced plans to cut 625 jobs to trim costs and improve performance in its yogurt and baking brands. TreeHouse Foods has cut hundreds of jobs in the last few years by closing plants, as well as offices in Omaha, Nebraska and St. Louis. Nestlé is taking a more aggressive approach, closing one of its global factories every month in order to streamline its operations.

Although currently a popular approach for cost savings, there is little proof that this strategy is as effective as companies hope. Kraft Heinz cut more than 1,200 jobs in 2016 and 2017 as part of its goal to trim 5,150 jobs. The company continues to face sagging demand for many products in its portfolio as consumers flock toward healthier, fresher and natural brands. In addition, General Mills weathered several quarters of disappointing sales even after it made deep cuts to its workforce.