Global soft drinks giant Coca-Cola is set to retrench scores of Kenyan workers, joining a growing list of local subsidiaries of multinationals that have cut jobs in recent months.
Coca-Cola Kenya declined to reveal the number of Kenyan workers that are set to be sent home, only saying that the “full scale of the layoffs will become clear by March”.
The redundancies are part of the Atlanta-based company’s plans to eliminate between 1,600 and 1,800 jobs globally in the short term.
“In Kenya this exercise has just begun and the extent of its impact will only be known at the end of quarter one,” said Coca-Cola’s regional communications director Norah Odwesso in a response to Business Daily queries.
Other local subsidiaries of global firms that have recently sacked staff are Nestlé, Tata Chemicals Magadi, Sher Karuturi and Cadbury who together have trimmed over 600 jobs in the last one year.
Food group Nestlé last week sent home 46 staff in its Kenya and regional hub.
The job losses stem from a mix of corporate cost-cutting strategies meant to improve profit margins for the multinationals in the increasingly competitive fast-moving-consumer-goods market.
Coke is in the process of restructuring its operations globally, giving it headroom to scale back on marketing and fixed expenses, including staff costs.
The multinational expects to save a total of $3 billion (Sh274 billion) annually by 2019 from the retrenchments and tweaking of its manufacturing, marketing and franchise systems.
Coca-Cola’s local employees are in charge of branding and marketing of the multinational’s products besides enforcing its franchise standards.
Manufacturing, packaging and distribution of the various soft drinks is handled by a number of independent bottlers, including Almasi Beverages, which imports Coca-Cola’s proprietary syrup and concentrates.
Ms Odwesso did not specify the severance terms of the affected employees but said the company is “committed to treating them fairly.”
She added that the soft drinks giant cannot rule out further job cuts in the future, noting that this will depend on a continuous review of operations to enhance efficiencies.
The layoffs at Coca-Cola signal increased pressure among the leading fast-moving-consumer-goods manufacturers that are looking to trim operating expenses as a means to growing profit margins.
Coca-Cola, for instance, has registered profit declines and a sluggish volume sales growth in recent quarters in what has prompted its global executives to deepen the cost-cutting initiatives.
Nestlé also says its recent performance in Kenya and 20 other African markets has been unsatisfactory.
“This has led management to rethink how we operate with a view of accelerating growth,” Alastair Macdonald, the head of Nestlé’s regional HR said in the January 15 notice of redundancy.
“We anticipate that several employees and related functions may be impacted by this intended redundancy.”
This stance has been criticised by executives of Kenyan manufacturing firms who say local units of multinationals are often sucked into pressures facing their parent firms.
“Most companies coming to Kenya operate through short-term goals with focus on quick returns which often doesn’t work. In any business resilience is very important,” said Vimal Shah, the CEO of Bidco Oil Refineries.
“They forget that the solution is not in cutting jobs but rather in understanding areas of weakness in operations and providing remedies.”
Some multinationals have, however, found the going too tough, with several closing shop or shifting their manufacturing to Egypt in pursuit of cheaper electricity and economies of scale.
Cadbury Kenya, for instance, last year shifted its production of confectionery goods to Egypt in a decision that left 300 workers jobless.
Soda ash producer Tata Chemicals ceased operations last year citing high costs amid weak demand for the commodity, retrenching 200 employees.
The bankruptcy of Indian-owned flower firm Karuturi last year also led to loss of hundreds of jobs.
The ongoing job cuts among the large firms paint a gloomy employment outlook given the importance of manufacturing and agriculture in job creation.
The labour-intensive manufacturing sector employs the largest number of people after agriculture but its ability to create new jobs has recently suffered from outsourcing and increased automation.
“There is increased outsourcing and automation in business cutting across factory processes to accounting and distribution,” said Paul Kinuthia, the chief executive of Interconsumer Products.
“This is the new model that is helping to create the redundancies.”
The challenges in the manufacturing sector are in contrast with those of services industry, including construction, banking and retail that have grown faster despite generating relatively fewer jobs.
Co-op Bank recently let go of 160 managers, underlining the trend where lenders are cutting their staff numbers despite double-digit profit growth.
The contribution of manufacturing to Kenya’s gross domestic product dropped to an all-time low of 8.9 per cent in 2013, reflecting the ongoing shift in the economy’s structure towards the services industry.
Manufacturing, which accounted for 9.5 per cent of GDP in 2012, has seen its importance in the economy decline steadily over the past decade.