Mondelez pulls pin on finding local manufacturer for Kiwi candy

The company will press on with plans to transfer production to Australia.

Mondelez International has given up on finding a local manufacturer for its New Zealand suite of candy and will ship production to Australia, having already decided to close the Dunedin Cadbury factory.

The local arm of the multinational processed food maker offered to put local production out to tender for a New Zealand supplier after deciding to wrap up New Zealand production early next year but has since given up on that idea when the only bidder struggled to meet Mondelez' requirements. The company investigated a number of alternative options including partnering with local firms to make the full product portfolio through to offering individual products to potential suppliers.

"Unfortunately, we only received one formal response to the RFP documents from a local supplier that was interested in manufacturing the full portfolio of Kiwi products in New Zealand," Mondelez New Zealand country head James Kane said in a statement. "We've worked very closely with that supplier over the last six months to try and find a way for it to take on the work. However, the unique requirements of these products – particularly the marshmallow-based products – meant it simply wasn't possible."

That means the company will press on with plans to transfer production to Australia as the global group consolidates manufacturing to improve margins.

The Cadbury factory, which employs 350 people, will close early next year after Mondelez chose to shut the facility and move production closer to its Asian supply chain. Kraft bought the factory in 2010 as part of a £11.9 billion takeover of the global Cadbury group, of which the New Zealand assets were worth some $200 million. Kraft later spun out its global snacks business and renamed it Mondelez. In the first year of owning it, Mondelez injected about $80 million of new capital into the New Zealand entity.

Since then, Mondelez's New Zealand operations have become closer to the global group, with almost 31% of its sales in 2016 going to related parties, up from just 21% in 2011, and generating profits totalling $47.4 million, almost a third of what's been paid out in dividends, and leaving the holding company with equity of $6.4 million as at December 31. At the same time, it extracted $130 million in dividends from the New Zealand business.

The company plans to keep the Cadbury World tourism venture, which employs 36 people, and in August committed to pumping in $7 million to redevelop the business.

(BusinessDesk)