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‘An expensive place to manufacture our products’: Mondelēz proposes to close New Zealand Cadbury plant

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By Oliver Nieburg+

16-Feb-2017
Last updated on 16-Feb-2017 at 10:43 GMT2017-02-16T10:43:41Z

Mondelēz proposes to shift capacity at Dunedin site (pictured) to Australia with final decision due in the coming weeks. ©iStock/vale_t
Mondelēz proposes to shift capacity at Dunedin site (pictured) to Australia with final decision due in the coming weeks. ©iStock/vale_t

Mondelēz International has initiated a consultation process to shut its factory in Dunedin in early 2018 and may shift capacity to Australia.

The company will consult people, unions, governments, community groups and suppliers before taking a decision in a few weeks.

350 jobs

If the proposal goes ahead, the move will affect 350 people working at the plant.

A first phase of redundancies would begin later this year, but around 100 would remain until early 2018, said the company in a release.

Mondelēz said it would support any employees looking to relocate to the company’s facilities in Australia.

Local brands

Photo: MDLZ

Mondelēz currently produces some local brands such as Pineapple Lumps, Jaffas and Chocolate Fish for the New Zealand market at the Dunedin plant. It is considering hiring a third party manufacturer to produce these brands locally.

Factory is distant from the main market

The Dunedin plant has produced Cadbury products for more than 80 years. More than 70% of production capacity is exported, mainly to Australia.

Amanda Banfield, Mondelēz’s area vice-president for Australia, New Zealand and Japan, said it was an “incredibly difficult announcement”.

“We operate in an increasingly competitive industry and the factory’s distance from its main market, low volume and complex product portfolio, make it an expensive place to manufacture our products,” she said.

The move forms part of the company’s global supply chain strategy to move production to larger multi-category factories and to close smaller sub-scale facilities.

Mondelēz in New Zealand and Australia

©iStock/sldesign78

Mondelēz is the market leader in New Zealand's chocolate market with a 50% value share in 2016. The company also led the Australian market last year with a 37% value share. But it lost a 1% share on the previous year to premium players such as Ferrero, Darrell Lea and Lindt. The Australian chocolate confectionery market grew 4% in value in 2016 driven by the premium and dark chocolate segment. The Australian chocolate market is predicted to record a compound annual growth rate (CAGR) of 2% up to 2021, a slowdown compared to the last five years.

[Source: Euromonitor]

Under the proposal, Mondelēz would no longer manufacture in New Zealand from 2018, but around 130 people would continue to work in the country in commercial, finance and HR jobs.

Mondelēz said it was consulting interested stakeholders on the future of the Dunedin plant beyond 2018.

“…We are hopeful of finding a buyer that will use it in a way that supports the local community and economy,” the company said in a FAQ on its website.

Cadbury World proposal

The company said it would invest in its existing tourist attraction in Dunedin Cadbury World, which attracts 110,000 visitors annually.

It is proposing to redevelop the site with a final decision due by April, but said it “won’t impose it on the community”.

A private operator would manage Cadbury World beyond 2018/2019 under the plans.

“New Zealand remains an important market for our business, and if the proposal is adopted, we will continue to invest in those things that make us a valued partner to hundreds of businesses throughout the country,” said Banfield.

Mondelēz had invested NZ $80m (US $58m) in the Dunedin factory in the last 10 years.

Background reading - Sept 4, 2013: 'Wrecking ball for Mondelez's older sites as supply chain overhaul planned'

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