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Food manufacturing facilities are shuttering, and as families crunch their budgets to find ways to save money on everyday essentials, the snack food market is taking a hit to its bottom line.
People haven't suddenly stopped liking snacks, but as grocery budgets shrink, the snacks get left on the shelves, and it's causing major brand names to close down facilities.
PepsiCo is slowing production of Frito-Lay, and they've closed two factories so far, with one more on the way. Learn what we know about the snack giant's future.
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The latest closures
In June, PepsiCo closed down its Frito-Lay manufacturing facility located in Rancho Cucamonga, California.
The plant had been operating for over 50 years, and according to PepsiCo, the warehouse, distribution, and transportation fleet will continue using the plant. Frito-Lay still has over 30 manufacturing plants throughout the U.S., but the historic location that birthed Flamin' Hot Cheetos will no longer be one of them.
Additionally, on Nov. 4, PepsiCo announced that its Orlando Frito-Lay plant will close its manufacturing and warehouse operations.
"This action was driven by business needs, and we are committed to treating every impacted employee with care – providing transition assistance, career support, and pay and benefits during this time," the company said in a statement.
Have other Frito-Lay factories closed?
In February, another Frito-Lay plant was shuttered in Liberty, New York, which was making PopCorners, a popped corn chip snack. According to PepsiCo Foods, the pace of growth made it difficult to sustain the site's long-term viability. The Frito-Lay facility in Middletown, New York, is still open but laid off about one-third of its staff last year.
How this impacts workers
The closing in Rancho Cucamonga resulted in 432 layoffs, and an additional 287 were laid off from the Liberty plant closing. PepsiCo Foods released a statement citing a commitment to supporting the impacted former employees and promising severance pay and benefits.
How is Frito-Lay doing?
PepsiCo's revenue has been declining as customers pull back on snack purchases, but that doesn't actually mean the company is at risk. In the third quarter, net sales rose 2.6% to $23.94 billion, which was stronger than expected. However, CNBC notes that worldwide volume for both food and drinks fell 1% during the quarter.
Will more facilities be affected?
It's unclear if more Frito-Lay facilities will be trimmed from the line; however, PepsiCo has been streamlining its production across several of its brands. They've closed four of their U.S. bottling plants in the past year, so there could be more to come as Americans continue to tighten their belts and budgets against unaffordable groceries.
What the company has to say
"We are truly grateful for all the support over the last five decades from our Rancho Cucamonga manufacturing team as well as the local community," PepsiCo told USA Today. "We are committed to supporting those impacted through this transition and we are offering pay and benefits to impacted employees."
Some employees have spoken out, though, saying they were let go and not allowed to transfer to different departments to keep their jobs.
Are other companies closing locations?
Several other companies have been impacted as consumers look for ways to stretch their budgets. Post Holdings closed two cereal manufacturing facilities in Ontario and Nevada, impacting about 300 workers.
Conagra Brands closed a plant in Michigan, which produced Marie Callender's frozen desserts. That impacted 85 employees.
Del Monte, known for producing fruits and vegetables, also shuttered a processing plant and two warehouses in Washington that impacted 51 workers and 448 seasonal employees.
J.M. Smucker also announced their Hostess manufacturing plant in Indianapolis will close by early 2026, which will impact 259 employees.
What this means for customers
Your favorite snack foods probably aren't going away just yet, as PepsiCo is aiming to optimize its supply chain to reduce operating costs rather than cutting products. However, products with low-performing sales will likely be first up on the budget chopping block if average Americans continue to struggle with rapidly rising costs of living.
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Bottom line
Many companies are shrinking their operations as the economy continues to nose-dive. Families struggling to tackle high grocery costs are forced to cut items they would otherwise purchase, and unfortunately, mass layoffs contribute to the downward spiral and further reduce consumer spending on non-essentials.
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