The Kraft Heinz Company announced its decision to eliminate 2,600 jobs and to close seven factories in Canada and the United States over the next two years.
Kraft Heinz was created following the merger of H.J. Heinz Company and Kraft Foods Group in July. Berkshire Hathaway, the conglomerate controlled by Warren Buffett, and 3G Capital collectively owns 51% of Kraft Heinz.
According to the company, it will close its factories located in Fullerton, California; San Leandro, California; Federalsburg, Maryland; St. Marys, Ontario, Canada; Campbell, New York; Lehigh Valley, Pennsylvania; and Madison, Wisconsin.
Kraft Heinz will also shut down its existing lunch-meat processing plant in Davenport, Iowa. It will move the production to a new state-of-the-art plant, which will be built over the next two years.
The company will move its Oscar Mayer and U.S. meat business unit and relocate approximately 250 corporate jobs to the Aon Center in Chicago from Madison, Wisconsin.
Madison City Mayor Paul Soglin said, “When you take the payroll, the production, the packaging materials and all that goes into the operation at Oscar Mayer, which has been going on for over 100 years, and then extend that to the dry cleaners, the retailers, the supermarkets, the neighborhood groceries, the local dining spots, kids sporting activities, (the impact) is very significant.”
Mayor Soglin added,”Keep in mind when General Motors closed the GM plant. The ripple effect throughout the state was extensive. It’s not just limited to the plant site itself.”
Kraft Heinz will also transfer a portion of its cheese production in Champaign to other factories in its network—a move that could result in 1,400 job cuts at the factory.
Kraft Heinz’ decision was difficult but necessary
Michael Mullen, senior vice president of corporate and government affairs at Kraft Heinz said the management of the company conducted an extensive review of its supply chain footprint, capabilities, and capacity utilization in North America. The management also explored extensive alternatives and options before it made the decision to close the plants.
According to him, the company’s decision to close the factories was “difficult but necessary to make Kraft Heinz more competitive globally and accelerate its growth.
“Our decision to consolidate manufacturing across the Kraft Heinz North American network is a critical step in our plan to eliminate excess capacity and reduce operational redundancies for the new combined company,” said Mr. Mullen in a statement.
Kraft Heinz will have 41 plants and 18,000 employees in North America after the closures. The company aims to reduce $1.5 billion in costs by the end of 2017.