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BCTGM on Strike in New York as Private Equity Owners Seek to Devour Wages, Benefits

Posted to the IUF website 19-Sep-2008

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Members of BCTGM Local 50 in New York city have been on strike against the Stella D'oro biscuit company since August 13, posting pickets around the clock in a battle to defend their wages, benefits and dignity against the company's private equity owners.

The strike at Stella d'oro, a former Kraft subsidiary, exemplifies the destructive process which results when pressure from financial markets to deliver elevated short term gains drives companies to boost dividends and share prices by continuously redefining their "core" business. The result is reductions in productive investment and employment, including the sale of profitable operations. Whole or partial product lines and divisions are then rotated through a succession of owners and investment portfolios. For growing numbers of workers, the process ends with the sale of orphan brands, manufacturing sites and services to a private equity fund.

Stella D'oro, established over 75 years ago, is a nationally known maker of specialty baked goods. The company has been owned by a private equity fund, Brynwood Partners, since January 2006. Brynwood bought it from Kraft, which in turn acquired Nabisco in 2002. Kraft bought parent RJR Nabisco when it was still staggering under the debt from the heavily leveraged 1988 buyout by private equity fund KKR (a buyout deal which resulted in the loss of tens of thousands of union jobs). The RJR Nabisco deal, the largest LBO of the decade memorialized in the book “Barbarians At The Gate,” failed to yield the profits anticipated, despite job cuts and plant closings. Workers continue to pay the price.

RJR Nabisco acquired Stella D’oro in 1992. At the time of the Nabisco purchase, the previously family-owned company had 3 bakeries across the US with 575 employees and annual sales of USD 65 million. Nabisco failed to integrate the company into its brand development, and eventually sold it on to Kraft, who (like Nabisco) bought the company with the goal of challenging competitors in the market for higher quality biscuits. Kraft went as far as investing in new equipment and production lines in the Stella plant in Illinois. But, under pressure to deliver ever greater "shareholder value", Kraft abandoned its investment, scrapped the newly updated plant, and sold on the remaining Stella operation. The shrinking process under Kraft left Stella D’oro with one plant and sales of some USD 30 million.

Shortly after the Stella sale, Kraft announced a 23% increase in quarterly earnings and the elimination of an unspecified 8,000 jobs worldwide. Parts of Kraft's Canadian operations were sold to two slash-and-burn private equity funds operating as CanGro Foods, which proceeded to pillage, sell, close and outsource the businesses. Today, little remains of that Canadian business.

At the time of the 2006 Stella D’oro purchase, Brynwood Partners declared “We are grateful to the Stella D’oro employees for their commitment and dedication to the business, and wish them continued success in the future.” The private equity firm than shed the company's own union-organized distribution system through an outsourcing arrangement…and waited for the plant workers’ collective agreement to expire.

When the contract expired on June 29, the private equity owners presented a series of demands as their "final offer". The company is insisting on reductions in wages over each year of the proposed 5 year agreement, a sharp increase in the employee contribution to health care, radical reductions in paid sick leave and vacation time, mandatory overtime and elimination of the union label from all product packaging!

The company's flat refusal to review their demands on the workforce or to consider union proposals left BCTGM Local union 50 with no choice but to strike. Union members have been walking the picket line in 6-hour shifts, 24 hours a day, where they've received support and solidarity from local unions, businesses and community residents. At a traditional Labour Day rally on September 1, state and local political representatives strongly condemned the company's stance and expressed support for the union's struggle.

At least two large public employee pension funds - CALPERS of California and the Pennsylvania State Retirement System - have investments in Brynwood, whose food portfolio also includes the Turtles and Flipz confectionery brands purchased from Nestlé (now merged as Demet's) and private-label sauce and frozen pizza maker Richelieu Foods.

BCTGM is engaged in a tough fight with a predatory investment fund and a management which has suggested that many Stella d'oro workers should be earning a minimum wage since "anyone can do their job." The union welcomes messages of solidarity and support - write to Local 50 President Joyce Alston at [email protected]