Mandate

Facing the headwinds of ever-changing consumer preferences, increasingly obsolete production facilities, and the need to lower cost, Kellogg’s had the vision to optimize its global manufacturing network. Announced as Project K, a four-year efficiency and effectiveness program, the initiative required paring back the manufacturing occupancy across several continents. The principles of Global Food Properties were retained to lead the packaging, marketing, and selling of the properties.

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Context

Kellogg’s plant closures came at a challenging time. Manufacturing generally had been moving away from older, value-engineered facilities, towards large, linear plants where massive throughput served as the antidote to compressed margins. Additionally, manufacturers were increasingly focused on food-safety, with heightened concern on inheriting pre-existing issues lingering in second-generation space. Both trends militated against the market, potentially curtailing demand, depressing values, and extending time-on-market.

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Process

The Global Food Properties project team launched a quick and intensive due diligence campaign on the plants targeted for closure. Key focus areas, by property, included inventorying value-enhancing infrastructure and finishes; identifying areas of competitive advantage, such as non-union labor, low cost power, or access to key interstate highways or demographics; and recommending what, if any, equipment might be bundled with each asset, either as a way of defining next-generation occupancy, driving elevated values, or compressing time on-market. The first wave of Project K included five properties, in three countries, on two continents, totaling 1,628,897 SF.

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Results

Global Food Properties launched an aggressive global marketing campaign, serially, as the plant closures were announced. Each of the four properties closed at or above the target valuations, and in all four cases, traded within or less than 12 months of the targeted closure. Underpinning the focus of Project K, Global Food Properties was able to shed 1,628,897 SF of surplus space, mitigate massive carry cost, restore jobs and investment to the affected communities, and returns millions of dollars to Kellogg’s efficiency initiative.