General Mills unveiled a rare mass layoff on Tuesday -- approximately 850 employees, about half of them in the Twin Cities -- as the packaged food giant struggles with high ingredient costs and soft consumer demand.

The job cuts amount to 2.4 percent of General Mills' global workforce. But the Twin Cities layoffs would account for almost 8 percent of the company's local employees, the majority of whom work at its sprawling Golden Valley headquarters.

Spokeswoman Kirstie Foster said that "administrative and support" positions would be most affected. Timing will vary, but "most individual decisions will be communicated in coming weeks."

The cuts come as General Mills fights a problem that is endemic to the U.S. food industry: Companies are trying to pass along a portion of their own spiking costs to consumers, but increasingly meeting resistance.

"[Packaged food] is a tough space," said Jack Russo, a stock analyst with Edward Jones. "You just have to grind your way through it, and unfortunately you have to attack the cost side of the business."

At General Mills, Foster said the layoffs are part of organizational changes that are affecting virtually every area of the company. "This will allow us to be better positioned to pursue long-term growth."

General Mills employs about 5,500 people in the Twin Cities and brings in about $15 billion in annual sales. In addition to its headquarters, it operates two research and development facilities, a flour mill in Fridley, and a baking and food service plant in Chanhassen.

In a news release, General Mills said its restructuring plan "includes organizational changes that strengthen business alignment, and actions to accelerate administrative efficiencies across the company."

The company declined to make Chief Executive Ken Powell available for an interview. General Mills will offer further details when it releases its fourth-quarter earnings in late June, as well as at a July investors conference, Foster said.

The restructuring could involve a variety of changes, analysts say, from realigning operating divisions to re-engineering the company's supply chain -- all in the name of reducing expenses.

Maker of everything from cereal to soup to snack bars, General Mills is one of Minnesota's most prominent companies, and consistently ranks near the top in local and national best workplace lists. It hasn't had a significant layoff or corporate restructuring in the decade since it bought crosstown rival Pillsbury.

The layoffs came as a surprise, a veteran employee said as he went for a noontime walk Tuesday outside the headquarters building. "This is a big deal," said the employee, who asked that his name not be used.

"We have had a tough year and we knew it was a tough environment. It's a shame we have to eliminate jobs," he said, noting the company made over $1 billion in profits last year.

General Mills reaffirmed its current year profit forecast on Tuesday. That means "things haven't gotten worse in their underlying business since they last reported [quarterly profits] in March," said Erin Lash, a stock analyst at Morningstar.

But through the first nine months of its current fiscal year, General Mills' profits -- while still over $1 billion -- were down 16 percent. And its stock has been a laggard in 2012.

Its shares have posted a total return of minus 3.1 percent, compared with a 4.2 percent return for the Standard & Poor's Packaged Foods Index. And packaged food stocks have generally underperformed the broader stock market. General Mills stock closed Tuesday at $38.58, up 3 cents.

Tough economics

General Mills and its brethren are caught in a squeeze. In its past fiscal year, General Mills has seen input costs rise at a 10 percent to 11 percent clip, the highest rate in several years. The company absorbs some of those higher costs, and passes some on to consumers.

But cash-strapped U.S. consumers have resisted, and that's led to a slowdown in sales volume -- as measured in pounds -- throughout the food industry.

In February, General Mills lowered its current fiscal year profit outlook due to flagging sales. During its last quarter, sales volume fell 3 percent, excluding an acquisition.

"There has been a lot of pressure on volume throughout the [packaged food] sector and obviously that affects profitability," said Morningstar's Lash.

Rob Moskow, a stock analyst at Credit Suisse, wrote in a March research note that General Mills might be due for "a dose of austerity" at its headquarters given the food industry's slowdown.

"General Mills' headcount grew 5.9 percent per year over the past three years at a time when just about every major U.S. food company was cutting back," Moskow said. General Mills' growth in sales-per-employee lagged its peers during the past five years, too, Moskow wrote.

Still, Moskow called General Mills a "highly investable proposition" due to its high-quality brands, strong management team and growing businesses in emerging markets.

General Mills will record total restructuring charges of approximately $109 million before taxes, reflecting one-time employee separation expenses and about $13 million associated with production equipment write-downs.

Star Tribune staff writer Patrick Kennedy contributed to this report. Mike Hughlett • 612-673-7003