Snow Brand Milk Products Co., which was embroiled in a massive food-poisoning scandal this summer, unveiled a major restructuring plan Tuesday that includes cutting 1,300 jobs — 20 percent of its workforce — within 21/2 years and closing its Osaka plant.
The nation’s top dairy product maker also announced that it will form a strategic business alliance with Nestle Japan Ltd., a wholly owned subsidiary of Swiss-based food company Nestle SA, as part of its efforts to repair its tarnished reputation.
Snow Brand President Kohei Nishi said the restructuring plan, which covers the period from fiscal 2000 through 2002, is intended to handle the damage from the scandal, in which about 14,500 people mainly in western Japan complained of sickness after consuming bacteria-contaminated Snow Brand products.
“We apologize for causing such a food-poisoning problem and will make the utmost efforts to regain consumers’ trust in our products,” said Nishi. “The food-poisoning scandal hurt our company much more than we had expected.”
Nishi admitted that behind the massive poisoning scandal was the “arrogance” of the firm as the nation’s top dairy manufacturer. According to the revised earnings forecast for fiscal 2000, which ends in March 2001, the company expects to fall into the red for the first time since it was founded in 1950.
Snow Brand is projected to suffer 53.8 billion yen in consolidated pretax losses and 47.5 billion yen in consolidated net losses. Before the scandal, Snow Brand had forecast its group pretax profit at 23 billion yen and net profit at 9 billion yen.
Group sales will also fall to 1.155 trillion yen from an earlier forecast of 1.32 trillion yen, the company predicts.
The restructuring plan is designed to make the company profitable again by the end of March 2003.
The restructuring program will reduce Snow Brand’s workforce by 1,300 to a total of 5,500 by the end of March 2003. The company expects to slash 400 jobs each year through age-based retirement and will not hire new staff in fiscal 2002.
The firm will also close its ice hockey and athletics clubs by the end of March 2002.
It will also reduce executives’ salaries by 30 percent from October until the company regains profitability and reduce winter bonuses by 40 percent for management and 20 percent for other employees.
To improve business efficiency, the company will place a greater focus on milk, butter and cheese products as its core businesses by setting up a product-development division Oct. 1.
It also plans to reorganize its 21 factories, downsize non-core businesses such as frozen foods, ice creams and pharmaceutical products and liquidate unprofitable subsidiaries.
Snow Brand’s partnership with Nestle Japan will focus on some of the non-core businesses, including yogurt and dessert products as well as frozen foods, according to the two companies.
Nestle Japan will provide expertise to Snow Brand in such fields as production, quality control and sanitation management, but both companies denied the possibility of a capital tieup or an exchange of board members.
The food poisoning outbreak in June and July was tied to the consumption of Snow Brand’s low-fat processed milk and other products shipped from the firm’s Osaka plant.
In mid-August, health officials found bacterial toxins in samples of powdered skim milk produced in its Taiki plant in Hokkaido, which had been shipped to the Osaka plant as ingredients for the processed milk products.
Health authorities believe the contamination of the powdered skim milk, coupled with the unhygienic conditions on production lines at the Osaka plant, caused the poisoning.
Compensation for people made ill by the outbreak and losses resulting from abandoning the recalled products are expected to cost 29 billion yen, company officials said.
Snow Brand’s sales declined 76.7 percent in July from the same month last year, 61.2 percent in August and are expected to fall 55 percent on the year in September, they said.
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