10 Sep 2014 Sour blow for Botswana as Mondelez closes chewing gum plant

In a rationalisation move that was inevitable, Mondelez International says it will close its chewing gum plant in Botswana in December and move production to Poland as African consumers ditch pellet gum for slab gum.

The closure comes as Mondelez reviews its global production network worldwide. It is looking to focus resources on larger-scale manufacturing facilities in a bid to improve efficiency.

The Botswana plant in the capital Gaborone currently produces Mondelez’s gum brands such as Dentyne and Clorets in pellet form.

“The decision was taken as demand for pellet gum produced in Botswana has dropped over the last period as there has been a shift in the gum consumer market towards a preference in slab gum,” said Mondelez in a statement.

Retail value sales for gum in Botswana in 2013 were $1m, up around 10%, according to Euromonitor International. The market is expected to remain largely stagnant up until 2019.

Around 134 employees at the Cadbury Botswana plant will be affected by the decision that takes effect in December. The company’s speciality chocolate plant in Namibia has reportedly already been closed.

Last year, the company also announced plans to close gum plants in Lebanon and Morocco.

By way of history, the Botswana operation was originally Dan Products and bought by Cadbury Schweppes in early 2006 for $62m in cash.

Sour taste as Mondelez exits Botswana

For years Botswana had been jokingly known in the region as the chewing capital of Southern Africa. Under the previous Cadbury ownership the plant that operates in Commerce Park in Gaborone had long been the source of all of Southern Africa’s Stimorol chewing gum. The nick-name seemed fitting given that the Chappies plant in Swaziland made that country the bubble gum capital of Southern Africa.

But in 2010 the UK food giant Cadbury was eaten by an even bigger fish, the American firm, Kraft Foods. Kraft had in turn been acquired by the US tobacco giant Philip Morris in 1988. With this rather unfortunate direct ownership of Kraft, a food producer by a very big tobacco giant it was time for basic rebranding to make sure that the company’s chocolate consumers were as a far away as possible from the foul smell of Philip Morris cigarettes and its many tobacco litigation cases in the USA.

Following the merger with Cadbury, Kraft split off its global snacking business and rebranded and renamed it in 2012 as ‘Mondelez’- meaning ‘delicious world’ in French.

There was something very British, almost colonial about the structure of Cadbury in Southern Africa, having plants producing specialised products in four of the five SACU countries. Specialty chocolates were made in Namibia, chewing gum in Botswana, Bubble gum and candy in Swaziland and in South Africa chocolate products (with most of the 900 jobs) in Port Elizabeth, South Africa.

When Kraft took over in 2010, Cadbury could still be seen as an example of what SACU could be – a region where all the countries benefited from the customs union and its industrial development potential and not just South Africa which normally gained all the economic benefits of industrial development and in return handed out a fat cheque every year to the treasury of other SACU members as compensation.

This cosy arrangement may have worked well for Cadbury but a giant like Mondelez International with global sales of $35-billion in 2013, controlling 15% of the world’s confectionary market and operating in global value chains, a rationalization of its many African operations was inevitable.

Mondelez International was going to have none of this Cadbury model and so Mondelez International has confirmed that its factory in Gaborone will close at Christmas with the loss of 134 jobs and the Namibian facility has also been shut with the loss of 28 jobs.

So who will become the new chewing capital of Africa- you guessed it the jobs are going to South Africa …and to Europe, probably Mondelez International’s facility in Poland.

Mondelez South Africa spokesperson Navisha Bechan-Sewkuran explained the move in the following way: “Mondelez International has decided to focus its resources on scale manufacturing facilities where it can generate greater efficiencies, to reinvest in growth.

“Demand for pellet gum produced in Botswana has dropped over the last period as there has been a shift in the gum consumer market preference towards slab gum. Based on careful consideration of the future viability of Cadbury Botswana, Mondelez International is announcing its intent to cease manufacturing in Botswana.”

For Botswana’s struggling manufacturing sector, already reeling from closures of its textile and garment plants in the last few years this is no small body blow.

Chewing gum had become one of the nation’s largest manufactured exports in 2011 valued at Pula157-million and ranked as the 11th biggest export, only slightly behind our exports of chilled beef. At present workers and management are negotiating a redundancy package so that Christmas for the unemployed Mondelez workers in Gaborone will not be as bitter as it might otherwise be.

This outcome should by no means be a shock to anyone who understands global value chains and even though it will be no recompense to workers at the Gaborone plant and the 1,000 or so dependents who rely on it for income, there was no way that a small plant producing relatively small volumes of chewing gum was going to survive inside a giant like Mondelez International….

Mmegi.bw: Read the full article