Costly Sugar Pushes Candy Plant to Canada

March 25, 2002 -- Gina Martin has worked since high school at Kraft Foods giant Life Savers plant in Holland, Mich. It's where she expected to work until retirement, as did many of her friends and relatives who live in this western Michigan city.

But the divorced mother of two teens is now out of a job, and for reasons well beyond her control. "I'm angry," says Martin. "I'm upset. I'm frustrated."

That's because Kraft has decided to close the Life Savers plant — which has operated under various owners for 35 years — and move a thousand jobs to Canada.

Why? The price of sugar in the United States is just too steep, says Kraft.

And indeed, American sugar costs at least twice as much as foreign sugar due largely to strict federal limits on imported sugar and generous price supports for sugar cane and sugar beet farmers.

Add to that the fact that the North American Free Trade Agreement has made it easier for American companies to move their businesses to Canada and Mexico, and you have a problem for domestic workers.

‘We Offered Them the Store’

Holland tried mightily to keep Kraft in town. "We offered Kraft the store to stay in Holland," said Mayor Al McGeehan.

With Michigan's help, the city offered Kraft a 15-year tax break worth $25 million. But the candymaker said it could save $90 million over the same period simply by using the less expensive sugar available in Canada.

McGeehan said he's yet to have a real conversation with Kraft about their move. And he's upset about that.

"There are common courtesies that were not extended in this entire process," he said.

In Chicago, Sal Ferrara sympathizes with the mayor's plight, but he says business is business.

Ferrara heads the Ferrara Pan Candy Co. which has made candy on the same corner on the southwest side of Chicago for years.

He says he won't shut down his plant, but won't be expanding any of his business within the United States. "Never," he said. "I'd have to be crazy."

Ferrara has opened facilities in Mexico and Canada and said he had no choice. "Sugar is our primary ingredient. We use about two and a half million pounds of sugar a week. And it is the basis for our products."

The move across the border makes good business sense, he said. "I not only pay less for labor, I pay less for sugar."

Ferrara added he didn't want to move, but had no choice. "We've created 300 new jobs over the borders that could have been jobs in the United States."

Sugar Farmers Say They’re Not to Blame

But it's the part about labor and jobs that sugar farmers have fastened on. They are the ones who benefit from the price supports and import quotas, without which they say they would be out of business. And they say the candy makers are trying to scapegoat them for the loss of domestic jobs.

"We're really offended that they want to put the blame on us for leaving and going to other countries," said sugar beet farmer Ray Van Driessche, "when really it's labor, environmental standards, everything else that they don't have to deal with that's the real reason they are leaving."

In fact, growers argue that the price of sugar in this country cannot go much lower.

"If our price is pushed any lower, we're on the brink of losing major segments of our industry," argued Jack Roney of the American Sugar Alliance, the farmer's main lobby.

Gina Martin is not buying it. "Their prices get protected," she said, "and my job gets taken away."

But whatever the cause, the exodus of companies like Kraft Foods from U.S. cities like Holland is a real blow to people and their communities.

"Two years ago Kraft had a thousand employees in that facility," Holland's Mayor McGeehan said. "And by a year and a half from now, it will be zero."