Over 1,000 employees have suffered in the wake of plant closures in the consumer goods industry over the past two years, whilst companies continue to pump further investments into more profitable production centres.
In 2005-2007, Bunge, Coca-Cola, Friesland, Heineken, InBev and Unilever closed nine plants in order to boost efficiency. Over 1,000 employees were laid off or had to relocate after the old plants were closed.
Most companies that embrace such a strategy are the leaders of their field and primarily pursue improved efficiency. After they enter the market through acquisitions and secure a sufficient share, they start to close less profitable facilities in order to recoup losses.
The first step was made by Bunge vegetable oil producer in late 2005 when it closed Muntenia Bucuresti plant.
The vegetable oil market has been one of segments hardest hit in the food industry in recent years, a reason why most producers decided to shift to other market sectors.
Grivita plant in Bucharest, which is owned by Heineken Romania, the leader of the domestic beer market, was another production facility that closed in 2005 and laid off 180 employees.
Why do companies make such decisions? The list of strategic reasons includes global competition, a decline in demand for certain products or a shift in consumer tastes, technological alterations or a series of acquisitions that are often followed by layoffs.
"No matter what the industry is, companies permanently pursue improved efficiency, cost control and therefore stronger profitability, so that they are able to exist on even more competitive markets," believes Valeria Mihaiescu, a HR manager for the Balkans with Deloitte audit and consulting services.
The dairy products segment, was another important sector in the food industry that witnessed plant closures this year.
The domestic leader of this market, Friesland Foods Romania, closed down its Deta plant in Timis county, and will transfer production to Cluj and Targu-Mures.
Who stands to suffer in the wake of such decisions? Employees are the hardest hit by plant closures, and while the focus tends to be on laid-off workers, employees who stay with the company are often ignored.
The morale of employees who remain is of particular importance as productivity can drop, and affect costs more than the savings generated by the company from the initial layoffs.
Investors are also affected. "They can interpret such measures as a sign the organisation is in serious trouble (...)," explains Mihaiescu. HR specialists believe the best strategy to avoid a negative impact on businesses is communication.
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