.Candymakers make bittersweet move to Mexico

Original Article Click Here

Nothing says Valentine's Day in America like flowers and candy. But increasingly, the candy is coming from Mexico.

From jellied hearts to Hershey's chocolates, Mexico's candy exports to the United States have more than doubled since 2002 as cheaper labor and sugar draw U.S. candymakers south of the border.

The latest arrival is Hershey, which is building a 1,500-employee factory in the northern city of Monterrey to replace plants it has closed in the United States and Canada. It's following the lead of companies ranging from Brach's Confections, famous for its caramels, to Ferrera Pan Candy, the maker of Red Hots and Jaw Breakers.

Confectioners say that they're just trying to survive in a cutthroat market and note that most U.S. candy is still made in the United States.

But U.S. unions bemoan the loss of candymaking jobs. From 2000 to 2007, such jobs in the U.S. dropped 23 percent, to 75,440 from 98,050, according to the U.S. Bureau of Labor Statistics. A 2006 U.S. Commerce Department report said cheaper sugar and labor overseas were partly to blame.

"All these companies want to make it cheap overseas somewhere, then bring it back and sell it to our people who don't have any jobs to buy it," said Dennis Bomberger, business manager of Chocolate Workers Local 464 in Hershey, Pa.

Even some Mexican officials are unhappy, noting that chocolate factories are buying most of their cacao, the raw ingredient of cocoa and chocolate, from Africa and Brazil, not Mexico.

The move to Mexico picked up several years ago with hard-candy makers, said Bernard Pacyniak, editor of Candy Industry Magazine. Many of them cited rising American sugar prices, which have been propped up by U.S. government controls.

Brach's Confections Inc. closed its Chicago factory in 2003 and moved to Linares. Bobs Candies of Albany, Ga., a leader in the candy-cane business, moved its production to Reynosa in 2005.

In Juarez, Sunrise Confections opened a plant in 2001 to make candies for U.S. grocery-store brands. For Valentine's Day, it churns out jellied hearts and cinnamon hearts.

It now has 1,000 Mexican employees and is one of the biggest candymakers on the continent, said Beth Podol, the company's marketing manager.

Cuckoo for cocoa

The latest boom is in chocolate.

Hershey, which once marketed itself as "The Great American Chocolate Bar," has made the new plant in Monterrey the centerpiece of a $575 million reorganization.

Since 2007, the company has closed or shrank factories in Oakdale, Calif.; Reading, Pa.; San Francisco and other sites.

Moving many of those product lines to Monterrey could save the company $190 million a year by 2010, Hershey says. It already has a plant in Guadalajara that makes candy for the Mexican market.

Company spokesman Kirk Saville would not say what the company plans to make in Monterrey, adding that the plant will only account for 10 percent of the chocolate sold in the United States and Canada.

But Bomberger, the union official, said the Monterrey plant is already making Hershey's Miniatures and Pot of Gold boxed candies for the U.S. market.

In January, Swiss chocolate giant Barry Callebaut opened a plant in Monterrey to produce about 100,000 tons of chocolate and cocoa a year for Hershey and other food makers.

The factory exports NesQuik to the United States, and Carlos V bars and Abuelita hot chocolate bound for U.S. markets with large Hispanic populations. In 2007, it opened a chocolate museum, Mexico's first.

Mars Inc.'s Mexican branch used to import Snickers and Milky Ways from the United States. Now, it produces them at a chocolate factory opened in 2007 in the northern city of Montemorelos. The McLean, Va.-based company has not said whether it plans to export them to the United States.

Bittersweet business

For U.S. chocolate makers, low wages are the draw, said Noé Lecona, director of Mexico's National Association of Makers of Chocolate, Candy and Related Products.

Workers in Mexico's processed-food industry make an average of $2.70 an hour, according to the National Institute of Statistics, Geography and Data Processing. At Nestle's factory in Toluca, a skilled machinery operator makes 220 pesos a day, about $15.70 (U.S.), said Maria Luis Ochoa, secretary of the local Chocolate Workers Union.

The same worker in Hershey, Pa., makes $19 to $25 an hour, Bomberger said.

Despite the growth in jobs, cacao growers in Mexico grumble that foreign companies and the Mexican government have done little to resuscitate Mexico's cacao industry.

The county's small farms cannot compete against cheap imports from Ivory Coast, Brazil and Indonesia, the national Union of Cacao Producers says.

As a result, Mexico's cacao production dropped to 20,000 tons last year from 47,000 tons in 2003. "We're exporting more chocolate, but it's all (assembly) work," Lecona said. "It leaves us nothing."