Digging Deeper: Local impact of Kraft and Heinz merger
Madison (WKOW)-- News of a monumental merger between Kraft and Heinz shocked many, including employees and union reps at Oscar Mayer in Madison, a subsidiary of Kraft foods.
"We learned this morning from the news just like everyone else," UFCW Local 538 Union President Doug Leikness says.
The 538 union features more than 600 employee members from the Oscar Mayer Plant, but the company has a total of 1,500 workers in the Madison area that could be affected by the new merger.
"There's nobody that is alive right now that knows what's going to happen to this plant," Leikness says. "My opinion is this plant is sitting here fine. We're productive and we're going to remain that way."
A Kraft spokesman tells 27 News, executives still aren't sure whether or not the merger will lead to layoffs or restructuring here in Madison until the deal is finalized later this year.
UW-Madison finance professor Oliver Levine says looking at what happened to Heinz after Warren Buffet and investors bought the company is a good tell tale sign of what's to come.
"When we saw this deal in 2013 there was only mild layoffs," Levine explains.
Levine says the merger was likely made to consolidate the two company's distribution networks, to cut costs and slim down the amount of competition in the processed food industry.
"There's not a lot of new markets, new opportunities for companies these days. Instead of growing organically by just creating new products or moving into new markets, companies are looking to cut costs any way they can," Levine explains. "A very easy way to do that is to merge and reduce competition, reduce redundancies."
Madison College marketing professor Steve Noll says the merger also makes the new company more attractive to foreign markets, a potential growth area for processed foods.
"I think these companies are probably looking at American consumerism in the next ten years and asking if the whole sustainable food movement just a fad or is it something that is going to burn out in three to five years. They might be motivated to move into foreign markets."
Chamber of commerce leaders in Madison tell 27 News they have spoken to Kraft executives since the announcement and they're optimistic for the future. Officials with the Wisconsin Department of Workforce Development are also optimistic saying Kraft still has plenty of job openings posted in their job center.
Financial experts say consumers may soon experience higher prices for some of their favorite foods. Experts say it's due to less competition in the processed food industry. Kraft spokesmen say they are planning to unveil new products later this year after the merger is finalized.
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