In July 2015, Kraft Foods Group Inc. announced its plans to merge with H.J. Heinz Co., creating the third-largest food and beverage company in the United States. The manufacturers of household staples such as Kraft Macaroni & Cheese, and Heinz Ketchup, are targeting and shutting down facilities nationwide in an effort to consolidate production and cut costs.
With this decision, The Kraft Heinz Co. has determined the fate of 2,600 employees. Among them are the 400 workers in Upper Macungie who will be left unemployed by the end of 2016.
“It’s tough,” said Michael Mullen, the senior vice president of Kraft Heinz Co. “At the same time, we regret the impact our decision will have on employees and the Upper Macungie community. We know that communities such as those, where Kraft Heinz is the major employer, will be especially impacted by our decision.”
Lehigh Valley’s facility is one of seven Kraft manufacturing plants in the nation that will be closing. For over four decades, Upper Macungie has been producing household favorites such as Lunchables for on-the-go meals, Kraft cheese slices to accompany hamburgers and Grey Poupon mustard to dress up sandwiches. More recently, the local plant began manufacturing the increasingly popular single-serve coffee pods, which some workers believed could prevent the plant from being acquired with the merger because Heinz lacks coffee products.
However, Lehigh Valley residents have become familiar with news of local businesses closing in the last four years. Last September, A&H Sportswear Co. Inc. closed its swimsuit manufacturing facility in Nazareth Township putting 93 out of work. Over the last year, Merck’s pharmaceutical facility closed in Hanover Township leaving 156 people unemployed, and the closure of the Walgreens distribution center in Hanover left 400 out of the job market.
Though it has been decades since the loss of the lucrative Bethlehem Steel industry, the Lehigh Valley region has suffered from several closings and layoffs since 2011. However, the local economy has proven its resilience by developing local employment organizations, institutionalizing severance benefits, and expanding other manufacturing facilities to welcome more jobs in the area.
Mullen said that Kraft Food Group Inc. plans on giving severance benefits to employees as well as providing outplacement services and other resources to help them pursue new jobs. On the real estate front, Kraft Heinz Co. also plans on working with government officials to find a potential buyer, and he believes that the facility is appealing to the several food and beverage processing companies in the local area.
“What you don’t usually see in the news about the Kraft plant closing, is that about five different locations around the Lehigh Valley jobs are being created and many of those are for the same kind of work,” said Lehigh economics professor Thomas Hyclak. “While the newspaper and everybody picks up on the announcement that 400 jobs at this particular location are closing, there are also other jobs that are being created and job expansion is occurring at the same time within the economy.”
Earlier this year, the Lehigh Valley Economic Development Corporation announced the Lehigh Valley’s gross domestic product has grown to a record-high of $35.4 billion.
According to the Pennsylvania Department of Labor & Industry Center, as of October 2015, the unemployment rate in the Lehigh Valley is 5.1 percent, which is only .1 percent above the national unemployment average. The total number of jobs in the Lehigh Valley has also increased from 399,100 in October 2014 to 400,000 in October 2015. Transportation, warehouse and manufacturing jobs have increased by 1,500 in the last year, and are among the local middle class jobs that hire high school educated residents.
In 2013, Don Cunningham, president of Lehigh Valley Corp., worked with the state to instill a $35 million expansion of the Kraft plant creating 45 new job openings. Despite news of the closure, Cunningham said that he is optimistic that workers will be able to find jobs quickly and the LVEDC will have no problems when it comes to selling the facility.
“The Kraft facility is the prime food and beverage corridor for the Lehigh Valley, with quick access to Interstate 78, rail service, and access to the nearby pre-treatment plant,” Cunningham wrote in an email. “A loss in this sector is likely to be much easier than in other areas. Employees losing their jobs as a result of this closing will find help through the Lehigh Valley Workforce Investment Board and other entities in locating other opportunities within the Lehigh Valley.”
The food manufacturing industry is one of the largest and fastest growing sectors in the Lehigh Valley. Companies such as Ocean Spray, Nestle Waters, Ice River Springs, Coca-Cola, Niagara Waters and Boston Beer all have facilities in the local area. Cunningham believes the likelihood that former Kraft employees will find new employment at these companies is very high.
Local organizations are also working to ensure that residents are finding jobs after suffering from the layoffs and business closings over the past few years. The Hispanic Center Lehigh Valley refers unemployed individuals to local temp agencies such as Career Link and CACBB and helps them seek out job opportunities.
“Sometimes we have direct hires, which is great when it comes from the company itself, because obviously, we’d love to see everyone permanently employed, which doesn’t happen all the time, so that’s why we have the temp agencies to help,” said Bennie Khamneh, the food pantry and community resource coordinator.
Aside from the work force, The Hispanic Center deals with the emotional and mental hardships that come with losing a job. The center guides people in applying for social security benefits, housing, and in some cases even food stamps and providing metro transportation. Although emotional turmoil isn’t portrayed in the state’s statistics of economic growth, lay offs can have detrimental effects on residents’ lives.
Although Upper Macungie plant has not yet released its workers from employment, Khamneh said that when they do, “we’re ready for them.”
Note: A sidebar to this story about The Hispanic Center Lehigh Valley can be found here.