Stella D’oro Company today responded to recent misleading and inaccurate reports regarding its negotiations with the Bakery Confectionery Tobacco Workers and Grain Millers Local 50 Union and the possible closure of the Company’s Bronx bakery operations.
The Company issued the following statement to set the record straight:
“Stella D’oro is an historic brand with great products that has achieved a loyal following of dedicated consumers in its more than 75 years in operation. Since 1992, however, the Company has suffered a steady decline in sales and profits after it was sold by the founding family to Kraft/Nabisco. The Company was purchased by Brynwood Partners in January 2006, in a transaction that was financed with 100% equity and no debt, with the intent of turning around the struggling Company and restoring its heritage.
Since Brynwood Partners bought Stella D’oro, the Company has undertaken a number of critical strategic actions designed to ensure its long-term health, including introducing new products, securing new retail outlets and investing approximately $11 million to purchase modern equipment and finance the Company’s continued operating losses and capital expenditure needs. Despite what is being stated in the media, Brynwood Partners has not taken any money out of the Company in fees, interest payments, dividends, distributions, or any other form. Stella D’oro also never received a $175,000 Manufacturing Assistance Program (MAP) Grant from New York State, as was incorrectly alleged.
Despite its strategic actions, which resulted in Stella D’oro’s first sales increase in 15 years, the Company has continued to lose money – including more than $3 million in operating losses since 2006 through the time of the strike – primarily due to its uncompetitive labor cost structure. Contrary to misleading statements that the Company is profitable, just not as profitable as its investors would like, the fact is that the Company was and still is losing considerable amounts of money each year.
During the bargaining process, despite self-serving statements to the contrary, Union officials were granted access and reviewed the Company’s 2007 audited financial statements detailing the Company’s ongoing losses and are fully aware of the pressing need to do their part by making wage and benefit concessions in order to make Stella D’oro once again a viable business in the Bronx community.
Stella D’oro’s request for wage and benefit concessions is not unreasonable if the facility is to continue to operate in the Bronx, as was Brynwood Partners’ original intent. The facts show that the Union’s pay scale at Stella D’oro is completely out of sync with the Bronx community and today’s economic reality. Total wage costs being paid by Stella D’oro to its Union workers were and still are far higher than competitive labor costs of businesses in the surrounding area. With wages and benefits, the annual cost to the Company of a Stella D’oro cookie packer exceeds $65,000 per year. Under the current Union contract, Stella D’oro union employees receive:
Average wages and benefits exceeding $35 per hour, including:
o Up to 10 weeks of paid leave each year
o Full pension and medical benefit programs costing the Company more than $10 per hour with no employee contributions.
Stella D’oro simply asked the Union to accept more realistic market-based wages and benefits that would be phased in gradually over a five-year period in order to keep Stella D’oro a part of the Bronx community. However, since negotiations between the Company and the Union began in May 2008, the Union has consistently refused to engage in meaningful discussions. The final offer presented by Stella D’oro to Union leadership prior to the strike last August represented minimal cuts with a total value of approximately $400,000, which would have required no wage reductions in the first two years. Union leadership responded to the Company by demanding a contract that would have added $700,000 in new labor costs.
After more than a year since negotiations began with effectively no concessions from the Union forthcoming, Brynwood Partners is left with little choice but to exit the business, and regardless of the alternatives available currently believes it will have difficulty recouping its investment. The Union has mistakenly assumed that Stella D’oro’s July 6, 2009 announcement that it is exploring strategic alternatives means that production currently at the Bronx facility will be outsourced. While this is one of the strategic alternatives available to the Company, other strategic alternatives include selling the business as a going concern, selling the business to a buyer with its own manufacturing capabilities, or permanently closing the plant and selling off the Company’s assets among others. The Company will thoroughly consider and evaluate all potential alternatives and under any scenario, Stella D’oro will fully comply with all of its obligations to bargain with the Union.
Stella D’oro and Brynwood Partners are saddened by the situation and for the many loyal Bronx-based employees who will be adversely affected by the Union’s unrealistic demands. Under the right cost structure, Stella D’oro could remain in the Bronx and prosper, continuing to provide good jobs at competitive wages. It’s unfortunate that when asked for concessions so the Company could right itself and remain a viable part of the Bronx community, Union leadership has consistently chosen to strike, litigate and spread misinformation rather than work constructively to rebuild a once-great company.”
About Stella D’oro:
Stella D’oro is a leading manufacturer of cookies, breakfast treats, biscotti, and breadsticks. Stella D’oro is distributed through grocery stores, supermarkets, drug stores, specialty food stores and other retail locations across the United States. The Stella D’oro corporate headquarters and bakery is located at 184 West 237th Street, Bronx, NY, 10463.