Fazer closes 2 factories in industrial to in-store shift

The shift from factory-made bread to in-store baked has not been favorable for volumes, says Fazer director as two factories face closure.

Finnish firm Fazer has announced the closure of two of its bakeries – a move it said was unavoidable considering a market shift from pre-packed bread to in-store baked. 

Production at the sites in Hyvinkää and Ulvila will stop by autumn 2015, the company said, following a period of, “collaboration negotiations”.

Markus Hellström, managing director for Fazer Bakeries Finland, told BakeryandSnacks.com the closures were part of an effort to centralize production and improve efficiency in response to declining bread consumption and changing consumer behavior in the region and beyond.

The firm said the changes would be felt by all 146 employees of the two sites – 73 in Hyvinkää and 73 in Ulvila – but not all would necessarily be facing redundancy.

Frazer has 47 in-store bakeries where bread is baked every day, as well as other factories bakeries in Vantaa, Lahti, Lappeenranta and Oulu. Hellström said in Finland there had been “clear shift” from pre-packed bread towards bread baked in store, a trend the company had noticed in its Central European markets also.

“This shift was not favorable so we’ve been losing volumes,” he said.

Changes in the market

In its announcement, the company said: “Bread consumption is declining in Finland and consumer behavior has changed in a significant way. The share of bread baked in stores is growing and that of pre-packed bread is falling. Increasing the efficiency of operations must be continued to secure future competitiveness.”  

“Salary and energy costs have continued to rise as well and it is not possible to fully transfer the cost effects into prices.”

Hellström said: “Production costs have been growing for some time – and that’s okay if you’re growing in volumes too.”

However he said a challenging market environment had meant the firm had been facing increasing production costs and dropping volume sales.

The firm had seen “strong growth” between 2008 and 2011 with various acquisitions but there was a limit to potential growth in a country like Finland, he said, and Fazer had been “gradually reaching” that limit.

He said now it would be a game of retaining growth in its in-store bakeries, as opposed to new investments.

Fazer is a multination bakery, confectionery and biscuit manufacturer, with activity in food and cafe services also. In 2013 the group reported net sales of almost €1.7 bn ($2.31 bn). It has over 15,000 employees in eight different countries.

Employee negotiations

Of future job prospects for the factory’s 146 employees, Hellström said: “We want to further the employees’ possibilities of re-employment, either within or outside the group. We will liaise with the local employment administrations.”  

Adding to this, he said that it was fair to say that all 146 of the staff members would be facing changes after the closure in 2015, but said not all of them would be facing unemployment. He said the company would be working to reallocate them internally where possible, although he added: “Internally, we know that we can’t provide work to all those people”.

He said the decision to close the plants was the result of negotiations with labor unions from April – which was mandatory by Finnish law. “The labor representatives made their proposals. You can’t just dictate – there’s always a negotiation.”

He said the firm had looked at whether the same savings could be made whilst maintaining production at the site, but it had concluded that it was not. 

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