Kellogg exits direct store delivery business to strengthen snacks business
Kellogg has announced it will begin to exit its Direct Store Delivery (DSD) network in the second quarter, transitioning the DSD-distributed portion of the company’s U.S. snacks business to the warehouse model already used by Pringles and the rest of its North American business.
Kellogg has announced it will begin to exit its Direct Store Delivery (DSD) network in the second quarter, transitioning the DSD-distributed portion of the company’s U.S. snacks business to the warehouse model already used by Pringles and the rest of its North American business. The new model will reduce complexity and cost structure while driving growth and profitability for the company and its retail partners.
“The consumer and retail landscape continues to change,” said John Bryant, Kellogg chairman and CEO. “We have to change the way we reach and communicate with consumers. Because our customers’ and our own warehouse distribution systems have become more efficient and effective, we can now redeploy resources previously tied to DSD and direct them to the kinds of brand investments that drive greater demand with today’s consumers—ultimately growing our business and our retailers’ businesses.”
By shifting resources from the operational support of DSD to brand building, shopper marketing, and pack formats that better meet consumers’ evolving needs, Kellogg can better drive growth in its snacks business.
The warehouse model, to which the DSD network will be transitioned, leverages scale and technology that Kellogg and its customers currently have. Warehouse distribution is already utilized by 75% of Kellogg’s U.S. sales, including the Pringles, frozen foods, and morning foods businesses. Moving completely to a warehouse distribution system offers an opportunity to accelerate growth.
The transition from the DSD network will be complete in the fourth quarter of 2017. It will encompass a transfer of inventory from Kellogg’s distribution centers to retailers’ warehouses and the closing of its distribution centers.