WK Kellogg Co. will close its cereal plant in Omaha, Neb., and reduce production at another facility in Memphis as it plans to improve productivity at other facilities in North America.

About 550 employees will be let go as a result of the consolidation, the Battle Creek-based company said in a statement Tuesday. The Omaha plant will begin a phased reduction in production from late 2025 with a full closing slated for the end of 2026. The Memphis factory will also begin reducing production late next year.

Kellogg cereal workers’ union ratified an agreement with the company in December 2021 that included a moratorium on U.S. cereal plant closures through October 2026.

WK Kellogg plans to invest $450 million to $500 million to modernize supply chains and operations with new infrastructure, equipment and technology at existing plants in Battle Creek; Lancaster, Pa.; and Belleville, Ontario, and boost production at those locations.

In February, the company told analysts that it planned on “consolidating the manufacturing network.” Kellogg, which made 800 million pounds of cereal last year across six plants, has about 3,000 employees, according to its presentation at the time.

“We are prioritizing and investing in more agile and efficient platforms and reducing our reliance on older, more rigid and higher cost platforms,” Chairman and CEO Gary Pilnick said Tuesday in a conference call with brokerage analysts to discuss quarterly results. “By doing so, we plan to consolidate our overall network footprint, which would drive improved operating efficiency.”

WK Kellogg (NYSE: KLG) is a spinoff from the former Kellogg Co., which split into two separate entities nearly a year ago, and focuses on cereal brands including Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran and Rice Krispies. The larger Kellanova (NYSE: K) is based in Chicago and manufactures and markets the company’s snack food brands.

In late 2023, WK Kellogg received a $5 million grant from the Michigan Strategic Fund board to invest in the legacy plant in Battle Creek. At the time, the company expected to invest at least $44 million, and potentially as much as $143 million, in the Battle Creek plant for new equipment. The Michigan Strategic Fund board late last year also approved a Renaissance Zone for 15 years for the plant, which will abate an estimated $1.27 million annually. 

Pilnick called the modernization plan “a significant step in our journey as we continue to prioritize investments and consolidate production to ensure we have a reliable, resilient, efficient, and agile supply chain, and importantly, ensuring our business has the appropriate margin structure to compete effectively.”

“These are necessary decisions made with thoughtful consideration to ensure our supply chain network is more reliable and allows WK to thrive into the future,” Pilnick said. “The best way to think about this is we’re shifting production from the oldest facilities to more efficient facilities, and also from old platforms that are more rigid to newer, more agile technologies. We feel good that we have the right capacity, the right ability to produce going forward as we execute on this project.”

WK Kellogg also reported earnings Tuesday, saying it now expects sales growth to be at the lower end of its -1% to 1% range for the year. The company reported $672 million in second-quarter sales, a 3.9% decline from a year earlier, with $31 million in net income, or 36 cents per diluted share. Midyear sales declined 2.8% to $1.37 billion, with $64 million in net income, or 73 cents in diluted share.