A group of investors is saving the H.J. Heinz Co. factory in Leamington, Ont., from closing, in a gamble it can tap new markets for Ontario-grown food and thrive in a struggling manufacturing sector.
Highbury Canco Corp., made up of four investors, including the manager of the factory, said it will employ 250 people to make and distribute Heinz tomato juice and other canned goods. It plans to add its own products as it runs a scaled-down version of the plant that has operated for 105 years in Southwestern Ontario.
Heinz said in November the plant would close this summer, putting more than 700 people out of work and devastating a town that has depended on the economic engine of Heinz for generations.
Pradeep Sood, a Highbury director, said he approached Heinz a few months ago with a proposal to make some Heinz products under contract, known as co-packing. He expects Highbury to assume ownership in July.
“We looked at it purely as a business model and felt if things were done right we could make it happen. Generally, when you start a business you don’t even have a customer, you start from scratch. In this case, we were looking at starting with Heinz, being their co-packer. That makes you think differently,” Mr. Sood said. “It’s very, very exciting because if we can make a go of this, others will realize that there is a way to keep Ontario competitive and make things happen.”
The plant currently makes Heinz Ketchup, Diana sauce, baby food and other items. Ketchup production will soon end, but Mr. Sood, who was born in India, said the products he is considering include Indian food for export.
Pittsburgh-based Heinz was bought last year by by Brazil’s 3G Capital and Warren Buffett’s Berkshire Hathaway Inc. Mr. Buffett said the Leamington plant was unprofitable.
Financial terms of the deal were not released.
Sandra Pupatello, head of the WindsorEssex Economic Development Corp., cautioned the deal is in the early stages. She said there were three other credible groups interested in buying the plant, which would have been an expensive liability for Heinz had it sat empty.
Southwestern Ontario’s manufacturing sector has seen a long list of factory closings and layoffs in recent years, as manufacturers retreat to countries with lower wage and production costs. The Canadian dollar had hovered around parity with the U.S. currency for several years and has been blamed for slumping exports, though it has lost ground in recent months.
Mr. Sood said the relatively strong dollar is a concern, but said a smaller, more versatile operation with lower costs should be able to make money and expand.
Heinz has deep roots in the area, and has been the buyer for much of Ontario’s tomato crop for a century. Leamington, population 28,000, has a hockey rink and baseball diamond built on land donated by Heinz.
Rob Crawford, who represents unionized workers at the factory, said the “future looks a little brighter than it did a couple weeks ago,” but he is sad to see Heinz leave town.
“They’ve been generous to the community,” Mr. Crawford said. “They’ve been generous to us, the workers.”
The Globe and Mail
Published Thursday, Feb. 27 2014, 9:21 AM EST
Last updated Thursday, Feb. 27 2014, 6:49 PM EST