More broken Kraft promises – this time in Spain

Some 160 Spanish workers producing Kraft-branded products are at risk of joining the growing line of unemployed former Kraft workers.

In 2008, following a benchmarking exercise involving Kraft’s three European cheese factories, Kraft decided to close the most productive and profitable of the three – the El Caserío factory in Mahón, on the island of Menorca (Spain) – and transfer production – including a local brand which had been produced there for the past 80 years – to the other two.

In the face of this decision, the IUF-affiliated Spanish food workers union, Agroalimentaria CC.OO, insisted that the better business decision would be to sell the El Caserío business to a local enterprise. The union argued that the proposed closure would not only lead to the loss of employment for the factory’s 163 workers, but would have economic and environmental consequences for the island of Menorca. On the other hand, selling the factory and maintaining production would preserve jobs, the livelihoods of some 300 families, dairy farms and rural employment and traditions.

But Kraft remained adamant that no viable buyer could be found. The option of closing the factory, however, was losing its attractiveness, as the government had informed management that the conditions for approval of redundancy procedures for the Mahón workers had not been met.

Following a vigorous campaign led by the union and supported by the government and civil society, Kraft finally did find a buyer. In May 2009, it announced the sale of the factory to the Nueva Rumasa Group, a family-owned conglomerate with holdings in the food, beverage, retail and hotel sectors, and which, Kraft management said, had produced a viable business plan.

The transfer of ownership took effect on 1 July 2009. On the same date a co-manufacturing agreement negotiated between Kraft and the new owner, Quesería Menorquina-Nueva Rumasa, also came into effect. The agreement covers the production of El Caserío-branded products for a period of three years.

With this operation, Kraft avoided having to pay workers’ compensation while ensuring itself continued revenues from the sale of its branded products.

It appears now that Kraft was either grossly negligent in its lack of necessary due diligence in finding a viable buyer or grossly dishonest to its workers and the people of Menorca, as Nueva Rumasa is now insolvent and under investigation for fraud.

See UGT and CC.OO campaign together for their members’ rights at bankrupt food company

Less than a year after the transfer of the company, the difficulties began to appear with delays in wage payments and payments to suppliers. At the end of 2009, Quesería Menorquina had a debt of some EUR 33 million owed to suppliers, creditors and employees. By January 2011, payment delays of up to two months began accumulating across the Group’s companies. In mid-March, the workforce at Quesería Menorquina had a week-long “vacation” because suppliers stopped delivering raw materials. Nueva Rumasa applied for bankruptcy protection on behalf of its Menorcan business, but on 5 April, the Court stepped in and declared Quesería Menorquina bankrupt and took over administration of the company.

Nueva Rumasa has clearly demonstrated that it never had a viable business plan for Quesería Menorquina. The factory cannot operate for lack of raw materials, which are not being delivered because the suppliers are not being paid. The workers are not being paid and are at serious risk of losing their jobs and any social protection.

Where is Kraft in all this? Kraft Foods has aggravated the already precarious future of the factory and its workers by suspending all new orders, claiming that Nueva Rumasa is failing to comply with the co-manufacturing agreement. Some 40% of the factory’s production is on Kraft Foods’ behalf.

The IUF joins the Spanish food workers union, Agroalimentaria CC.OO, in calling on Kraft Foods to answer some uncomfortable questions about its own failure to comply with commitments made. Did Kraft truly not know about the doubts concerning Nueva Rumasa’s creditworthiness circulating in Spanish financial circles already months before the sale? Or did Kraft just not care and instead blithely tell its workforce, the community of Mahón and government authorities that the buyer of the historic El Caserío factory had a viable business plan?

Once again Kraft appears to be employing the same slippery tactics it used in the case of the Cadbury factory in Somerdale in the UK, which was slated for closure before Kraft came into the picture. By insinuating that it would be in a position to keep this factory open, Kraft  raised hopes and expectations – and got approval for the takeover. But no sooner did that happen, did Kraft then “admit” that it hadn’t had all the facts, that in fact the factory being built in Poland to receive the Somerdale production was already nearing completion, so there was no turning back.

In South Africa, where Kraft had secured regulatory approval for the Cadbury acquisition by affirming that there would be no major job losses as a result, the company plans to eliminate up to 400 jobs at the Port Elizabeth Cadbury plant.

Spanish workers are now joining workers in South Africa and the UK in demanding that Irene Rosenfeld respect and protect their rights. Agroalimentaria CC.OO together with the IUF will be asking for a meeting to discuss the future of the plant and the workers.