Immigration issues disrupt Aryzta's Cloverhill Bakery operations

by Jeff Gelski
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Cloverhill Bakery products, Aryzta
Cloverhill operates two Chicago-area baking plants and produces individually wrapped pastries for retail and food service customers.
 

ZURICH, SWITZERLAND — Lack of proper immigration documentation forced about 800 workers to leave Cloverhill Bakery facilities of Aryzta AG earlier this year, the company recently disclosed. The issue, which has required the hiring and training of new workers (equating to a third of the workforce at the plants), had a negative effect on financial results in the fourth quarter of fiscal 2017 and the first quarter of fiscal 2018.

Aryzta North America reported revenue of €409.5 million ($484.8 million) in the first quarter ended Oct. 31, which was down 11.5% from the previous year’s first quarter. Volume was down 7.1% in Aryzta North America, which followed a volume decrease of 16.1% in the fourth quarter of fiscal 2017 that ended July 31.

Zurich-based Aryzta AG addressed the worker documentation issues in its annual report for fiscal 2017. The company acquired Cloverhill Bakery in 2014. Cloverhill operates two Chicago-area baking plants and produces individually wrapped pastries for retail and food service customers. Its products include Danish pastries, cinnamon rolls, crumb cakes, cake donuts, honey buns and muffins.

Cloverhill Bakery facility, Aryzta
Following the worker disruption, the Cloverhill Bakery locations incurred losses of $19.3 million during June and July.
 

A third-party staffing agency supplied a substantial number of workers at the Cloverhill Bakery facilities. A federal audit of the agency revealed inadequate documentation, resulting in about 800 experienced workers leaving the business in the fourth quarter of 2017. New hires progressively replaced them.

“By merit of these employees being agency workers, Aryzta did not have the ability to verify documentation of these workers, and the immediacy and extent of the risk that existed was not known to the board,” Aryzta said in the annual report. “As these individuals had significant knowledge and experience of the baking process and represented over one-third of the workforce at these facilities, there has been a significant decrease in the labor efficiency and production volumes, as well as an impact on increased waste levels at these facilities, as a result of this disruption.”

The company did not offer further details about the degree to which production was disrupted.

Following the worker disruption, the Cloverhill Bakery locations incurred losses of €16.3 million ($19.3 million) during June and July, Aryzta said, adding the Cloverhill Bakery locations should return to profitability sometime in fiscal 2018. Excluding Cloverhill Bakery, organic growth was 1% in Aryzta North America in the first quarter of fiscal 2018.

Kevin Toland, Aryzta
Kevin Toland, c.e.o. of Aryzta AG

“It’s proceeding very, very slowly because it’s like having a brand new factory and a brand new workforce,” said Kevin Toland, chief executive officer of Aryzta AG, in a Bloomberg story published Nov. 27. “That’s presenting a lot of challenges, as you can imagine.”

Aryzta Group companywide had first-quarter revenue of €909.7 million ($1,076.9 million), which was down 5.5% from the previous year’s first quarter. Aryzta Europe had revenue of €435.2 million, down 0.3%, and Aryzta Rest of the World had revenue of €65 million, up 2.5%. 
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