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As Kellogg Co. executives discussed the company’s latest earnings report in a call Thursday, analysts were informed that a fire at its Memphis, TN cereal plant last July compounded supply chain interruptions last year caused by strikes at its US cereal production sites. The firm’s leadership also detailed that the financial impacts of the fire and the labor issues are expected to last through the first half of the year.

“In late July, we suffered a fire in our Memphis plant, which not only strained our network further, but impeded our ability to build inventory ahead of what would eventually be a strike at all four of our US cereal plants, spanning almost the entire fourth quarter,” Chairman, president, and chief executive officer Steve Cahillane told listeners. “The result of not being able to ship enough product and the related reduction in commercial support for these products was a sharp year-on-year decline in net sales.”

170 emergency response personnel were called to the three-alarm fire at Kellogg’s Memphis facility on July 25. Fire officials determined that a conveyor belt malfunctioned, igniting combustible materials inside of a rice dryer machine. The building and equipment received damage from the fire, smoke, and water.

While Kellogg’s dealt with the fire’s aftermath, 1,400 US cereal production workers went on strike in early October over a dispute on benefits and pay.

Cahillane said this week that Kellogg’s is still working to restore production, inventory, and service levels in its cereal business at the start of the year.

“The fire and strikes cost impacts spans across the fourth quarter of 2021 and quarter 1, 2022, owing to carryover of costs and lost operating leverage,” the executive stated. “In addition, there will be some missed net sales opportunities as we work to catch up on inventory, both ours and that of our customers.”

Kellogg’s expects to rebound from the effects of the fire and strikes in the second half of 2022.

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