The Michigan Strategic Fund Board has approved a Michigan Business Development Programme Grant of up to $5m, along with a Designated Renaissance Zone that will abate property taxes by an estimated $1.27m annually for 15 years.
The incentives means WK Kellogg will be able to retain the 170 jobs that were previously slated to be slashed.
In September 2021, while still one company, Kellogg’s had announced plans to move several production lines to its facility in Bellevue, Ontario, due to better efficiency and cheaper production costs – projected to be almost $20m in cost savings.
The big move was planned to happen at the end of 2023 and would have idled two production lines at Battle Creek, effectively making almost half the factory’s workforce redundant.
However, the state found a way to work with the company to preserve those jobs in Michigan, meaning Battle Creek retains its Cereal City status.
“We believe as a new company and a new leadership team that this is the right thing to do, not only for the business, not only for our employees but for our community as well,” said Stacy Flathau, chief corporate affairs officer for WK Kellogg.
“With [the support from MSF Board], not only can we maintain these jobs in Battle Creek, but we’ll add more jobs and we will invest millions of dollars in our facility and in training our employees to better position them for future growth and development.
“We are seeing some green shoots of some real engagement at our Battle Creek plans in recent months and we are very optimistic that will continue.”
WK Kellogg has planned to invest around $500m to upgrade its six North American manufacturing facilities, with at least $44m – with the potential of upping this to $143m – being earmarked for Battle Creek. The capital will allow for future expansion at the facility, which has capacity for six production lines.
In the meantime, maintaining operation of two of the three production lines will create 43 new positions. The company also plans to shift to a high-performing work team model, investing $60m in retraining all current employees over the next seven years.
“This investment will be able to maintain multiple lines of operations and eliminate the risk of layoffs that were expected at that manufacturing location, securing what are very good-paying manufacturing jobs in the city of Battle Creek,” said Josh Hundt, executive VP of the Michigan Economic Development Corporation (MEDC).
A tale of two opportunities
WK Kellogg was established in October as a result of the split of Kellogg Company into two independent, publicly traded companies.
Named after the company founder William Keith Kellogg, WK Kellogg is positioned as a premier cereal company across the US, Canada and the Caribbean, with annual production of over 360,000 tonnes of brands like Corn Flakes, Frosties, Special K and Rice Crispies bringing in around $2.7bn in net sales. It employs approximately 3,000 people: 700 in Michigan and just over half of that at the Battle Creek manufacturing plant.
The larger unit – Kellanova – retains the remainder of Kellogg’s assets in global snacking, international cereal and noodles, and North American frozen breakfasts (Pringles, Pop-Tarts, RXBar, Cheez-It, etc) amassing around $11.4bn in net sales.
The rationale is that two will be able to focus on distinct priorities more effectively, which includes sourcing, processing, distribution and marketing strategies. In June 2022 – when the corporate split was announced – Kellogg’s was the fifth-largest Michigan-based public company, with a market capitalisation of $22bn.
WK Kellogg Co remains headquartered in Battle Creek. Kellanova, meanwhile, maintains dual campuses in Battle Creek and Chicago, with its corporate headquarters in Chicago.
In the two years since the announcement, the company’s Belleville plant has undergone a $67m expansion. This included financial support via incentives from the Canadian government.