Maple Leaf Foods is cutting 1,550 jobs, closing plants in four provinces and streamlining distribution in a continuing efficiency drive by the big food processor.
The Toronto-based maker of processed meats, bread and other foods said Wednesday the changes are part of a three-year $560-million restructuring plan expected to boost competitiveness and profitability.
Maple Leaf will close processing plants in Kitchener, Hamilton and Toronto in Ontario; in North Battleford, Sask.; Moncton and a small plant in Winnipeg by the end of 2014.
The company said the plan will create 1,150 new jobs but the associated plant closures will more than offset that, resulting in a net loss of 1,550 positions from among its 21,000 employees.
“It certainly is the tale of two stories,” said Michael McCain, president and CEO of Maple Leaf.
“The hard reality is that these types of changes also result in the net loss of approximately 1,550 jobs, which will largely occur in 2014.”
Maple Leaf is Canada’s biggest food processor, making and selling such well-known store brands as Maple Leaf, Burns and Schneiders hot dogs, Tenderflake lard, Dempster’s bread, Olivieri pasta, as well as Shopsy’s deli meats and Mitchell’s Gourmet foods.
The company has operations across Canada and in the United States, United Kingdom, Asia and Mexico so it competes with global food giants and is particularly sensitive to the effects of a high Canadian dollar and rising costs of energy and raw materials.
Under its latest plan, Maple Leaf will invest $560 million to create four large technologically advanced plants.
The Toronto company formerly known as Canada Packers will spend $155 million to expand and upgrade existing plants in Winnipeg, Saskatoon and Brampton, Ont.
It will also build a new $395 million prepared meats plant in Hamilton, where it opened a new bakery run by its Canada Bread unit just last month.
The company will also close four of its distribution centres — in Moncton, N.B., Burlington, Ont., Kitchener, Ont., and Coquitlam, B.C. — consolidating distribution for Eastern Canada in a new centre in Ontario and using an existing operation in Saskatoon as its Western Canadian hub.
“That is certainly the most difficult part of today’s announcement — the human impact of closing 10 sites,” McCain said.
He pledged to work with communities to find buyers for the shuttered plants, which it has done in the past. In April, Maple Leaf sold a meat processing plant it shut down in Berwick, N.S. to Eden Valley Poultry.
The company also closed a factory in the United Kingdom and another plant in Surrey, B.C..
Consolidation is necessary if the company wants to continue to compete against U.S. food processors who have been making strides in Canada while the rise of the Canadian dollar continues to put a squeeze on profits as it makes Maple Leaf’s exports more expensive, McCain said.
“If Canada is going to keep its critical value-added manufacturing job industry — particularly in the food business — where we are both a grower and a manufacturer, we must, invest in the scale, in the technology, and in the efficiency to secure sustainable job creation.”
Imports of prepared meats from the U.S. have increased from four to eight per cent of the market in the last six years, and have grown by 40 per cent since 2007 alone, McCain said.
The Canadian market accounts for the bulk of Maple Leaf’s $5 billion in annual sales.
“This is an ongoing threat that if not addressed would be very dire for the Canadian industry,” the CEO added in a conference call after stock markets closed.
Maple Leaf’s board unanimously supports the plan that will make the company more profitable when completed, McCain said. That includes support from a representative from West Face Capital, a major shareholder that had previously taken issue with the way the company was run.
Employees who are laid off will be encouraged to apply at the new plants, but McCain would not say whether those employees would be given priority over other applicants.
Maple Leaf was formed by the 1991 merger of Maple Leaf Mills Litd. and Canada Packers Inc. and grew rapidly after that by acquiring competitors such as Schneiders and Burns.
The company has been streamlining in recent years in a bid to improve its profitability and become more efficient.
Maple Leaf and many other food companies have raised prices as they contend with rising costs for ingredients — everything from the flour used to bake bread to sugar for pies and pastries and the pork, beef and chicken used in cold cuts and hot dogs. The Toronto-based company raised its fresh bakery prices by 20 cents per unit at the end of March.
The company recently ended a shareholder dispute by agreeing to bring the CEO of major shareholder West Face Capital onto its board of directors in a move to satisfy complaints about some of the directors’ being too closely involved on a personal level with the McCain family, which holds a controlling vote.
The company was focused three years ago on a Lysteria-tainted meat scandal that led to a massive recall of cured meats manufactured at a contaminated Toronto plant. Later, Maple Leaf was under pressure from shareholders to improve its finances and restructure.
In trading on the TSX, Maple Leaf shares fell one per cent or 18 cents each to $10.40 following the announcement.