The hot summer has increased demand for the ice cream products of Baskin-Robbins. Nevertheless the company plans to close a plant in Peterborough Ontario that will result in 80 workers being laid off.
Baskin-Robbins had $1.8 billion sales from 6,777 outlets spread around the world. In the first quarter of this year before the heat wave sales jumped by 9.4 per cent.
The factory to be closed in Peterborough is the last place in North America where the company actually makes what it sells. The 80 workers at the plant provided products for about 1400 outlets outside of the U.S. including 113 stores in Canada.
Production will now be moved to third party suppliers. Canadian supplies will come from Scotsburn Dairy in the province of Nova Scotia. However, much of what was produced in Peterborough will be produced in El Paso Texas. The Peterborough plant was unionized but only 5.3 per cent of worker in Texas are unionized. Texas is a right to work state with no minimum wage.
Baskin-Robbins will not produce in its own plant in Texas. The company has decided that it will not be bothered producing anything itself in North America. By getting out of manufacturing the company hopes to drive costs down and sub-contract production and transfer the costs of labor to third parties.
However don't expect the U.S. to gain much from all this. The company sees its biggest opportunities in emerging markets as disposable income rises there. These markets also offer a great opportunity to find even cheaper third party suppliers of product.
The parent company of Baskin-Robbins is Dunkin' Brands. Dunkin Brands is owned by Bain Capital. This was Mitt Romney's company before he made a takeover bid for U.S.A. Incorporated. These firms together with Romney have been lobbying to get rid of the supply management system in dairy products that we have in Canada. This would reduce their costs further.
There are new trade deals being negotiated with Europe and there are also to be talks with Pacific nations about free trade. On the table no doubt will be Canada's supply management system.
If our dairy supply management system is dismantled the profits of Bain Capital may go up but wages will go down. However perhaps a few cents of savings will trickle down to the consumer just like melting ice cream on a cone.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com