16 Oct Pioneer Foods is to axe 1 200 best-paid jobs

Pioneer Foods, SA’s third-biggest food company, will embark on a major job-cutting exercise in bid to cut costs. More than 1 200 of its best-paid staff or 10% of the current workforce, are being put on early retirement, retrenched or redeployed to lower-paid jobs. Pioneer, like many food companies, is struggling in an economic climate where many consumers are feeling the strain and restricting their spending.

Newish CEO of Pioneer Foods, Phil Roux, has said that the group is to cut jobs “as part of a restructuring process to reduce costs,” to deal with “constrained consumer spending”, and that cutting wages was “one of the initiatives” underway to “increase competitiveness and enhance profitability”.

The company feels it is necessary to make these changes as it’s “the only way to expand its profit margins,” reports Eye Witness News. The food manufacturer is “consolidating its business units and balancing its resources”.

Pioneer could not comment further on this Monday because it is in a closed period with the JSE ahead of their results.

The multinational has four divisions, manufacturing FMCG food and beverages under the Bokomo, Sasko, Quantum and Ceres brands.

Job cuts are looming for South Africa’s middle and senior managers, analysts said this week, and other companies could follow suit as economic growth continues to disappoint and retail sales remain muted.

Later this week, data on retail sales are expected to show they grew at their slowest pace in more than two years in August.

Until now, blue-collar workers have borne the brunt of the recession. But growing union militancy, and government and trade union resistance to further job cuts, mean employers are now looking within the ranks of well-paid head office staff to cut the fat needed to boost bottom lines.

In August, Pick n Pay began a round of voluntary retrenchments focusing on its head office and regional head offices, in a bid to cut operating costs.

Many more middle and senior managers in South Africa could face the axe if economic conditions do not improve and if union militancy increases, South African Chamber of Commerce and Industry CEO, Neren Rau, has said.

“In terms of our interactions with our members, it definitely seems that there are retrenchments under way at other companies that are being dealt with on a more subtle and sensitive basis, both to protect themselves as well as to try and ensure some opportunities for those who will have to be retrenched.”

It was possible that job cuts were also an indication “of the challenges experienced by companies in dealing with unions, which are placing enormous pressure to improve the working conditions of lower-level employees”.

“There would be severe adverse reactions if companies had to retrench at those levels. That’s why companies are now turning to middle and senior management,” Rau said.

Last week, the World Bank said South Africa’s labour relations environment was holding back growth, and pinned the country’s slowing growth on trade unions and the paralysing strikes that have hurt various sectors including mining.

“People don’t understand how dire this is. We must view this in a very severe context … as a high risk for our economy when this type of activity starts to happen. My fear is that government and labour take this lightly,” Rau said.

While retrenching a few senior managers could result in similar savings to the retrenchment of a large number of unskilled workers, “South African managers are very highly regarded and rated, so companies could lose strong-performing managers to competitors or to companies outside (SA)”.

Vunani Securities analyst, Anthony Clark, said more food producers were likely to consider cost-cutting exercises as “every major food company has taken a knock”, mainly due to “a weak consumer”. Companies targeted middle management first, “because you don’t want to cut production staff as that’s where all the militant unions are”.

Independent labour consultant Tony Healy said the long-term savings from cutting middle management positions over blue-collar workers “are far greater, and that’s undoubtedly a factor that has influenced Pioneer Foods”.

Sources: Eye Witness News, BDLive, Reuters