Nov 04

As expected.

In a “difficult but necessary” decision, Kraft-Heinz will cut 2,600 jobs in the latest post-mega-merger “synergy” bloodbath. Thanks Warren.

Buffett Bloodbath: Kraft Heinz Laying Off 10% Of Workforce:

Back in August, we said “thanks uncle Warren” on the heels of reports which indicated it was time for Kraft employees to do their part to facilitate merger “synergies” in the wake of the Kraft-Heinz tie-up engineered earlier this year by everyone’s favorite folksy octogenarian billionaire along with 3G.

In short, Kraft Heinz said it would lay off 700 workers at Kraft’s corporate headquarters in north suburban Northfield, part of a cost-cutting plan that would slash the combined entity’s headcount in the U.S. and Canada by 2,500 jobs.

Well, on Wednesday we got more of the same with CNBC reporting that Kraft Heinz will close seven plants and lay off 2,600 employees. The company is also reportedly moving Oscar Mayer to Chicago from Wisconsin. Here’s what we know so far

The closing factories are in Fullerton, California; San Leandro, California; Federalsburg, Maryland; St. Marys, Ontario, Canada; Campbell, New York; Lehigh Valley, Pennsylvania; and Madison, Wisconsin, Michael Mullen SVP of corporate and government affairs, said in a statement.

Over the next 12-24 months, he said, production in those locations will shift to other existing factories in North America.

He said the decision to close the factories came after “an extensive review of the Kraft Heinz North American supply chain footprint, capabilities and capacity utilization.”

Calling the move “difficult but necessary,” Mullen said the closures would cut approximately 2,600 positions from the company’s North American factory-based employee population.

Here’s the headline dump:


And here’s a bit of much needed (if minimal) good news for Chicago:

Kraft Heinz announced Wednesday that it will move Oscar Mayer and the company’s U.S. meats business unit from Madison, Wis., to Chicago — a move that will add 250 jobs to the Chicago area, according to a company news release.

Meanwhile, Bloomberg reports that New York Governor Andrew M. Cuomo and U.S. Senator Charles Schumer have struck a deal to keep Kraft-Heinz facilities in upstate New York operational. Here’s more:

Governor Andrew M. Cuomo and U.S. Senator Charles Schumer today announced that an agreement has been reached to save at-risk Kraft-Heinz facilities which employ nearly 1,000 workers throughout Upstate New York. The agreement will ensure that Kraft-Heinz preserves a significant employment base throughout New York State for years to come and paves the way for additional investment and growth at a number of Kraft-Heinz facilities. Under the agreement, Kraft-Heinz will continue operating the Avon, Walton and Lowville plants. Additionally, Kraft-Heinz will defer its planned closure of the Campbell plant for a period of 12-24 months, during which time the company will work with state, federal and local officials in an effort to identify a new operator who would retain the plant?s existing employment. The State and company are also committing to each invest at least $20 million to support and modernize Kraft-Heinz’s Upstate operations.

Governor Cuomo said: “The prospect of these across the board closures was very real and not only would have been devastated these communities, but caused ripple effects in New York’s dairy industry and beyond. This agreement reverses course and, saves hundreds of local jobs and commits Kraft-Heinz to invest millions of dollars in the Upstate economy, with the potential for job increases in the years to come. I thank Senator Schumer and Kraft-Heinz for working with us to protect jobs in these communities and help ensure the future of each of these plants.”

Senator Schumer said: “After any merger that involves an important Upstate company like Kraft that employs so many hundreds of workers and supports so many dairy farmers, I worry about any potential negative impacts on our Upstate New York jobs. New York Kraft factories in Avon, Walton, Campbell and Lowville were in the crosshairs, and thousands of families were at severe risk of losing their jobs. But working together with Governor Cuomo we were able to craft a deal with Kraft-Heinz that saves these factories from closure; that protects jobs; and that invests in growth for our future in each of these communities. It’s a win-win deal that will be good for Kraft-Heinz and good for retaining and growing jobs in Upstate New York.”

Ok so apparently, Kraft-Heinz is laying off 2,600 immediately after agreeing to not layoff 1,000 in upstate New York under pressure from Cuomo and Schumer.

The net result would seem to be 1,600 layoffs, but who knows as this is still a developing story. What we do know for sure is that we were correct in March, when we said the following in the wake of the megamerger:

Another day, another mega-M&A deal taking advantage of abnormally low bond rates, this time however not involving biotechs or a specialty pharma seeking to purchase a debt-free balance sheet, but one involving the Oracle of Omaha himself, and his Heinz investment, which will merge with Kraft Foods whose market cap was over $40 billion this morning on the news of the merger, and create the third largest food and beverage company in the US, and 5th largest in  the world.

And while the resulting company will certainly be an unprecedented food giant, one which leaves the US food industry even more concentrated, here is the rationale behind the deal and the punchline for American workers: “significant synergy opportunities.” Translation: thousands of layoffs imminent.

It took seven months.


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One Response to “Kraft Heinz Laying Off 10% Of Workforce”

  1. squodgy Says:

    Yet more evidence that Mega Mergers lead only to rationalisation, competition elimination and job reduction.

    In the interests of social responsibility, people like Buffet should stand out as an example, but greed and power prevail.

    Unless we collectively, consciously boycott their products, we doom ourselves.

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