Who Will Give in First? Costs Rise as Earthgrains Dispute Rumbles on
Although most of the plants have continued to operate with managers and temporary workers, food industry analysts are speculating the company has begun to accumulate added costs of overtime, temporary workers, travel and expenses for relocated employees, security guards, legal counsel and for extra shipping costs to buy products from outside suppliers. It also faces lost sales to competitors. Although first-hand information is lacking, the analysts also speculate the striking workers will be under increasing financial pressure to consider returning to work. Relatively low-paid bakery workers may find it difficult to live without paycheques for an extended period, said another analyst who believes the strike will hurt workers more than the company.
Retailers could ditch Earthgrains
However, as the strike has expanded, stock market analysts have become more concerned about prospects for an early settlement. The longer the strike is continued, the more retail stores will shift shelf space from Earthgrains to other bakers, and they speculate it may prove difficult for Earthgrains to recover the business foregone.
David C. Nelson, food and agribusiness analyst at Credit Suisse First Boston, a brokerage firm in New York, said the company had experienced significant market disruptions in California - where its four plants have been able to supply only about half of normal demand - but elsewhere had been able to maintain 80-90% of its normal market presence. Others suggest Earthgrains may lose market share to the larger Interstate Bakeries Corporation, if its shortfalls continue in California.
A new contract agreed last weekend with Teamsters Union drivers in California was significant because delivery workers have not joined the sympathy picket lines, allowing Earthgrains to maintain distribution with minimal disruption. Although no one predicts a near-term end of the strike, Nelson added, "The situation seems to be peaking in severity as the (union) position may be weakening owing to a lack of outside support and increasing numbers of employees crossing the picket lines." He said the company was confident in its ability to maintain current service levels in the Southeast and Texas.
Earthgrains historically has maintained "excellent relations" with its employees' unions, Nelson said. This strike is the first against Earthgrains in more than seven years (when it was Campbell-Taggart, a subsidiary of Anheuser-Busch), but it comes as the US trade union movement is seeing a resurgence after many years of decline. Recent successes against the giant shipper UPS and the dominant East Coast communications company Verizon have given the labor movement confidence, and the lowest unemployment level in several generations makes it more difficult for companies to find replacements for striking workers. Interstate Bakeries earnings during last year's Q4 suffered because of an eight-day strike at its north-eastern US bakeries.
Share prices plummeting
It also comes against the backdrop of continued consolidation in the baking industry as a result of excess manufacturing capacity and little or no relative growth in demand for bakery products. Share prices of the major bakers also have declined sharply, with both Earthgrains and Interstate Bakeries, trading recently as low as US$17/share, compared with 1998 peaks of nearly US$40 for both. Over the past three years, baking industry shares declined by nearly 10% in value.
Protection from exploitation…?
The company and the union see different reasons for the dispute. The union says its members want protection against company demands to work overtime, saying some have been required to work 12-hour days (in one plant without overtime pay) and some seven-day weeks. The union has proposed a contract limit of 12 hours' required work in any 24-hour period.
Company officials dismiss that argument, saying the strike is part of the union leaders' strategy to organise eight non-union plants recently acquired by Earthgrains. The two also have been apart on wages. The St. Louis Post-Dispatch said the union had proposed a raise of US$1.45 per hour over three years while the company had proposed US$1.05. Hourly wages now vary from US$8.75 in Alabama to US$15.08 hour in Colorado.
On 17 September, the company said negotiations had been recessed after three days of bargaining under the auspices of federal labour-management mediators. Earthgrains said it has made offers covering its Alabama and other south-eastern US bakeries and asked the union to submit the offer to its members to vote whether to return to work.
Earthgrains said about 3,000 union production employees at 26 bakeries were on strike or honouring sympathy picket lines (of its total work force of more than 21,000). It said another 850 union employees were reporting to work as scheduled at the affected bakeries, with more than 50% of production employees working at bakeries in Alabama, Georgia, Texas and Mississippi.
During the past month, Earthgrains said, it had reached agreements on new labour contracts with Teamsters Union delivery employees in California and BCTGM production workers in Rockford, Illinois. The company also said it had negotiated new agreements in the past 90 days with production workers at 10 other bakeries and with employees at 12 other locations, such as thrift stores and depots.
Problems could block the acquisition trail
Earthgrains was created as in independent company in March 1996 when it was spun off with a separate share offering. Subsequently it has acquired two other large regional bakeries, the latest being Metz Baking Co. in March of this year. The company, which had US$2.6bn in sales last year (including Metz), is based in Clayton, Missouri, a suburb of St. Louis. Earthgrains brands include Holsum, Old Home, Rainbo and Iron Kids and it produces Roman Meal, Healthy Choice and other brands. It owns plants in Portugal and Spain producing Bimbo, Silueta and Semilla de Oro breads and makes Crousti Pate and Patrick Raulet brand refrigerated dough products in France.
Food producers with small domestic markets could struggle to make their business viable, unless they can conquer the export market. But in Tasmania, producers are cashing in on demand for gourmet prod...
A US district court has ruled in favour of US food company Campbell Soup in a lawsuit that was brought against Campbell and several of its subsidiaries in February 2002 by an entity representing the i...
US food company Campbell Soup has reported net earnings for the fourth quarter to 31 July of US$96m, or 23 cents per share, versus $59m, or 14 cents per share, in the year-ago quarter....
Campbell Soup Company has announced plans to build a new $80m, 220,000-square-foot culinary campus in Everett, Washington for its fast-growing premium refrigerated soup business....
Bakery company Grupo Bimbo has announced a deal to acquire certain assets and brands property of Empresas Chocolates La Corona SA in an operation that will amount to 471m (US$43.4m) pesos. ...
Mexican baked goods firm Bimbo is expected to expand this year via an acquisition in Latin America, according to analysts....
New Zealand dairy company Fonterra today (Tuesday) has announced that it is consolidating all its interests in Australia under the Fonterra name and further expanding its milk collection and processin...
Campbell Soup Company has announced that Arthur B Anderson is being appointed senior vice president-global research & development and quality, effective 8 June 2005. Anderson will report to Carl Johns...
- General Mills sales woes continue - analysis
- Why personalisation will take-off in US food
- Comment: Meal kits in US - don't believe the hype
- US food next wave on display at Winter Fancy Food
- Column: Kraft Heinz, Unilever and sustainability
- Unilever 'lining up spreads sale'
- UK own-label firm Park Cakes sold in MBO
- Immigration crackdown "risk" for US dairy industry
- BRF plant suspended amid bribery allegations
- Fonterra cuts earnings forecast