Simplot has today advised employees that its vegetable processing plants in Bathurst in NSW and Devonport in Tasmania are under threat of closure.
According to the company, the problem lies in unsatisfactory financial returns arising from a very competitive food industry environment and unsustainably high costs associated with manufacturing in Australia.
The vegetable canneries, which have both been in the Simplot business for years, are currently not competitive in the face of much lower cost imported product alternatives, the company said in a statement.
The high Australian dollar, whilst not causing the underlying lack of competiveness, was exacerbating the issues facing the plants, it wrote.
“The frozen and canned vegetable categories have been chronic profit under-performers for years, regardless of the value of the Australian dollar,” said Simplot Australia's managing director, Terry O’Brien.
He said that the company’s immediate imperative was to seek sustainable improvement opportunities with key stakeholders to help return the plants’ financial performance to the required level.
He said meetings are being scheduled with local, state and federal government representatives, employees, unions, suppliers and growers to discuss profit improvement opportunities.
“If insufficient opportunities are identified, we will be forced to close our Bathurst plant after the next corn season. Our Devonport plant will be required to produce a five year improvement plan with satisfactory outcomes or face the prospect of a longer term (three- to five-year) closure,” O’Brien said.
The announcement follows an intensive, six-month review of Simplot’s supply chain operations in the vegetable category.
Simplot said its parent company, the US based J.R. Simplot Company, remained “steadfastly committed to the Australian food manufacturing industry. Therefore, it is seeking ways that its Australian operations can improve returns in order to survive the significant structural changes in the dynamics of the Australian market.”
Simplot joins CCA's canned fruit manufacturer, SPC Ardmona, in battling with local conditions. The processor has called on the government to put temporary tariff protection in place after falling sales led it to cancel contracts with 60 fruit growers last month.
Simplot's Bathurst corn cannery is one of two vegetable plants that may be forced to close.
