Continuing to be the king of bologna is important not only for Oscar Meyer, it’s important for Iowa.
The Kraft Heinz Company’s planned $203 million Davenport, Iowa, facility will bring its Davenport facility into the 21st century. That’s a big leap from its antiquated downtown facility that was originally constructed in the late 19th century and is known as the “World’s Biggest Bologna Factory.”
The new facility will be built in the Eastern Iowa Industrial Center, and will receive a property tax exemption from the City of Davenport.
The project, which will be finished by 2017, will also receive financial assistance from the Iowa Economic Development Authority in the amount of a $1.75 million in tax credits and a $3 million forgivable loan.
On its end, Kraft Heinz has committed to preserving at least 475 full-time positions of the current 1,200 that exist at the old facility. Even with the workforce expected to be reduced by half, the construction of the new plant in Iowa is seen as a victory, as the state of Iowa defeated a competing offer from another unnamed state.
In a situation similar to the one in Davenport, the Oscar Mayer headquarters, which is also in a nearly century-old plant in Madison, Wisconsin, will not stay open, and its 1,000 jobs will be eliminated by 2017.
Under 3G Capital’s management of the recently combined companies, Kraft Heinz has committed to wringing out $1.5 billion in annual savings, and the company announced in November 2015 that it will close seven factories in the U.S. and Canada.
Warren Buffett Supports 3G’s Strategy
“3G has been buying businesses that have too many people,” Buffett explained at the 2015 Berkshire Hathaway annual meeting. “You will have never found a statement from Charlie or me saying that a business should have more people than needed.”
© 2016 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.