Kraft Heinz Co. is drastically shrinking its footprint in Illinois, moving from a sprawling suburban campus to a downtown Chicago office that is roughly a quarter of its current space.
The newly formed company plans to move its operations from suburban Northfield, Ill., to downtown Chicago, a spokesman for the company confirmed Thursday. Kraft Heinz (NYSE: KHC) maintains a second corporate headquarters in Pittsburgh. The move will have "virtually no impact in Pittsburgh," according to Kraft Heinz spokesman Michael Mullen.
“Today, The Kraft Heinz Company announced to our employees that we will be moving our Chicago-based co-headquarter location from Northfield to vibrant downtown Chicago in early 2016," Mullen said in an emailed statement.
The company has signed a 12.5-year lease to occupy five floors at the AON Center located in the city center. Kraft Heinz currently occupies about 700,000 square feet between its corporate office in Northfield and a small research and development center in Glenview, according to Crain's Chicago Business.
"The Kraft Heinz Company saw an immediate opportunity to firmly establish our dynamic new culture, based on meritocracy, speed, efficiency and collaboration, in a new downtown Chicago open-office space to support our next chapter of growth while further strengthening our world-leading brands," Mullen said.
Shrinking its physical space is a step out of Heinz owner 3G Capital's handbook, mirroring what the Brazilian private equity firm did shortly after acquiring Pittsburgh-based H.J. Heinz Co. in 2013 for $28 billion.
Today, Heinz leases space in two downtown buildings: about 300,000 square feet at its former North American headquarters in Heinz 57 Center, and about 95,000 at its co-headquarters in PPG Place.
Of the 300,000 square feet in Heinz 57 Center, the company last year subleased 140,000 to UPMC, has finalized terms with another new tenants and have in the range of 100,000 square feet left available. Heinz also has been marketing the 31st floor at PPG Place as available for sublease, potentially reducing its global headquarters to about 70,000 square feet.
In the suburbs, the company, under 3G, has reduced the size of its Heinz Innovation Center at Keystone Summit Corporate Park in Warrendale, subleasing almost one-third of what once was a 150,000-square-foot operation.
Kraft Heinz, which closed on its merger July 2, has said it plans to reduce costs, but has not addressed how this will impact employment. After 3G closed on its $28 billion Heinz acquisition, they cut about a third of the company's corporate staff in Pittsburgh within the first six months. Kraft Heinz employs about 2,000 people in Northfield.
Since 3G's takeover of Heinz, the private equity firm has cut 7,400 jobs and closed five of its lower-performing manufacturing facilities, producing savings of about $250 million a year.
With Kraft Heinz, which investors estimate as a $49 billion deal, 3G is projecting annual cost savings to reach $1.5 billion by the end of 2017, which executives said would be accomplished through increased scale, operational efficiencies and cost reductions.
Kraft recently invested in the suburban Illinois campus, known as Kraftown, spending several million dollars on a renovation completed in late 2013.
Gerry McLaughlin, executive managing director of the Pittsburgh office of Newmark Grubb Knight Frank, described the ownership of Kraft Heinz as a “close to the vest” group that acts quickly.
He acknowledged the Kraft Heinz move to a much smaller office in Chicago suggests more limited opportunity to move Pittsburgh operations to the company’s dual headquarters there.
"I think they are committed to Pittsburgh. I think they firmly will live up to that,” he said.