North America's third-largest bakery, George Weston Ltd., is closing two plants and cutting 1,100 jobs as consumer tastes shift away from sweets and white bread and more toward healthier whole-grain products.
The company, owned by Canadian billionaire Galen Weston, said all of the jobs cuts are in the United States. However, future streamlining could affect its Canadian operations, spokesperson Geoff Wilson added in a telephone interview.
"We're looking for opportunities for streamlining and cost-cutting in both Canada and the U.S.," Wilson said.
The latest cuts affect Weston's Interbake division, a company it has owned since 1946 and which makes about half the Girl Guide cookies sold in the U.S., along with other baked goods.
The cuts come as little surprise to analysts who follow the industry, which has been struggling to keep up with consumers' rapidly changing tastes.
In fact, Weston has fared better than rival Interstate Bakeries Inc., which last fall filed for bankruptcy protection from creditors.
Still, the turnaround is dramatic for a company that just four years ago placed a big bet on the bread business when it paid $1.7 billion (U.S.) for Bestfoods Baking Co. Inc.
Profit and sales soared the following year, partly on the strength of its bakery business, the company later reported. The balance came from Weston's 61% stake in Loblaw Cos. Ltd., one of Canada's leading supermarket chains.
However, rising obesity rates, aging baby boomers' growing obsession with health food and last year's low-carbohydrate diet craze converged to deal the U.S. bakery industry a body blow.
Last month, Weston took a $75 million write-down on its Entenmann's sweet goods bakery business, part of the Bestfoods acquisition, and some analysts believe that division will be cut further. Entenmann's makes cakes, pies, doughnuts and cookies.
"Baking industry conditions have changed significantly over the past year," Weston told shareholders after the company reported a $1 million loss for the fourth quarter partly due to the Entenmann's write-down.
The company has told analysts that it is working to turn around its business as quickly as possible.
However, switching its assembly lines from producing mostly one kind of white bread to a more diverse mix of whole grain and mixed-grain products will be costly and time-consuming.
The company said it would close two biscuit-making plants, one in Elizabeth, N.J., the other in Richmond, Va., over the next 12 to 18 months, part of a previously announced plan to restructure Weston's U.S. Interbake biscuit operations.
Some 800 jobs will be cut in New Jersey and 300 in Virginia, reducing Interbake's workforce by about a third, Wilson said. Production will be consolidated at two others plants, including a new facility in Virginia and an existing one in South Dakota, the company said.
The move will cost the company $50 million in one-time shutdown and startup costs, the company said. Weston said it would also accelerate depreciation of certain equipment by $25 million over next year to year-and-a-half.
Last summer, Weston's closed a Kaufman's bakery in Buffalo, N.Y., and a cake factory in Northlake, Ill.