German choc firm shifts packaging to Poland in search of cheaper labor

30-Jul-2014 - Last updated on 31-Jul-2014 at 11:16 GMT

Hachez production shift: There has been some local reaction, but on the whole understanding, says marketing manager

Hachez, owned by the Danish Toms Group, will move part of its packaging production from Germany to Poland in an attempt to claw back some of its recent losses.

Martin Thorup Haagensen, marketing manager for Toms Group, told ConfectioneryNews that Hachez had been suffering losses for the last couple of years, meaning action was needed to make savings and regain its competitive standing.

Haagensen said the company had chosen Poland because there were “lower salaries” in this region.

The move comes just weeks after the announcement that Germany will introduce its first-ever national minimum wage, previously being one of only seven of the 28 European Union member states not to have a pay minimum. Asked if this had influenced the company's decision to shift packaging production, he said no. "In the confectionery industry in Germany significantly higher wages than the minimum wage are negotiated between employer/employee organizations."

The decision to shift some packing operations has put a question mark over 71 Bremen workers, and will see packaging production of gift boxes and novelties transferred to the parent company's already existing sites in Leszno, Poland in time for Easter 2015. Chocolate production would remain in its north western German site.

Haagensen said the firm had an internal saving target figure, but would not be making this public. "But, the saving is significant, otherwise we wouldn’t have done it."

Asked if such a move based on wages might reflect badly on the firm, he said: “Of course we considered that, and there have been some reactions like that locally. But generally there is an understanding that we are making losses.”

The bare minimum

According to the Federation of European Employers, in 2014 the minimum wage for full-time adult workers aged 23 and over in Poland was 1,680 zlotys per month (€404.69), based on a 40-hour week and 52-week year. Meanwhile, Germany approved its first-ever national minimum wage earlier this month at €8.50 per hour. Comparing this new hourly minimum to the Polish monthly minimum, €404.69 would constitute to just over 47 and a half hours of work at a €8.50 per hour rate.

The changes are set to take effect in January 2015, with the German government granting a two-year grace period for some employers. The wage will not cover minors, interns, trainees or long-term unemployed people for their first six months of work.

The proposed changes, which still have to pass through the country’s upper house, have been met with some opposition from German business leaders who say it will hit firms’ ability to hire and export. The Deutsche Bank published a report on potential impacts of the decision entitled ‘Minimum wage at EUR 8.50: The wrong policy choice’, in which it predicted that between 450,000 and one million jobs would be lost.

According to the IWH institute in Halle, roughly 12% of workers in Western Germany and one in four in Eastern Germany earn less than €8.50 an hour.

Layoffs and union talks

Haagensen said automation of the Bremen plant had been considered as an alternative option, but it was concluded this would only lead to similar staff losses.

Responding to the decision, the Union of Food and Catering for the regions of Bremen-Weser-Elbe (NGG) called for as many jobs to be saved within the company as possible in upcoming talks.

Dieter Nickel, NGG CEO for the Bremen branch, said if next year saw layoffs, the union expected “reasonable compensation benefits”.

Haagensen said it would be working with the union to establish options for the 71 employees which could include early retirement or work within the company performing “other tasks”. However, he admitted that in order to make the target savings, some jobs would be lost, although it was not yet possible to say how many.

The company also said it would be looking into which tasks were currently outsourced, evaluating options of performing these “internally again” to create employment alternatives.

He said that there were no plans to move chocolate production from Bremen; where it had “always been produced”.

Union leader Nickel added that although it had been disappointed with the conclusion of previous talks, he "welcome[d] the company’s announcement to maintain the production and management in Bremen and to invest more in the traditional brands Hachez and Feodora. Lack of maintenance of these brands in the past few years is indeed one of the causes for the present difficult situation."