Cloetta said its merger with Leaf in December had resulted in a combined overcapacity and the decision had been taken to “achieve savings”.
Cloetta will close its factory in Aura, Finland and its Gävle and Alingsås sites in Sweden. Production at these sites will move to existing factories in Levice, Slovakia and Ljungsbro, Sweden.
A move to reduce costs
Jacob Broberg, senior vice president corporate communications at Cloetta, told ConfectioneryNews.com: “We have a high fixed cost at the factories in Sweden and Finland. And there is overcapacity in the group’s structure.”
The company said the move would result in annual cost savings of €11.2m (SEK 100m) with gradual effect in 2013 and full effect during the second half of 2014.
Cloetta CEO Bengt Baron added: “Fierce competition requires us to continue producing products with high quality at a low cost.”
Modern production
The production move will cost Cloetta between €35.9 and €41.5m (SEK 320 and 370).
Broberg said Cloetta had invested heavily in the Levice facility which was practically a new factory.
He said the modern production methods at this site would help keep costs low.
The company also announced that warehouse in Malmö, Sweden and Slagelse, Denmark would be outsourced and consolidated into a new warehouse in southern Sweden.
Around the time the merger was sealed, Leaf closed its factory in Slagelse and moved production to Levice, Slovakia.
The human cost
The closures will results in 345 job losses. 150 jobs will go at the Gävle site, 140 in Aura, 30 in Alingsås and 25 warehousing jobs.
Broberg said that “emotions ran high” when staff were told this week.
Production of Cloetta’s Ahlgrens bilar brand will move from Gävle to Ljungbro and remaining products to the Levice site.
The Aura and Alingsås closures are due in early 2013, while Gävle will close in early 2014.
Foretold
Euromonitor analyst Pasi Hanonen previously told this site shortly after the merger that the potential synergy benefits and savings from the merger could lead to a lower number of production facilities.
He said at the time: “In the short time, this can be somewhat risky – when Leaf closed one of its production facilities in Finland a few years ago, the initial local reaction to the relocation of the production of long established Finnish brands abroad was negative.”
When asked how the closures would affect consumer sentiment, Broberg said: “As long as the products are the same standard, consumers will continue to buy the brands.”