Bitter reality: Candy less likely to be 'Made in US'

Candymakers are leaving the United States. Already, they're producing mints in Argentina and candy canes in Mexico. Soon, Kraft will close down its LifeSavers' factory in Holland, Mich., and move it to Quebec.

It's enough to make red, white, and blue candy lovers weep.

Thanks to rising costs and arcane farm policy, America is now being forced to choose between saving its sugar farmers and protecting its candy manufacturers. As it finalizes this year's farm bill, Congress looks certain to side with the beleaguered sugar producers, who for years have outlobbied the sugar-using companies.

Doors are closing on some of sugar, manufacturers are closing US plants and slowly moving operations across the borders – south to Mexico and Latin America, and north to Canada. Chicago, the nation's candy capital, is especially vulnerable to this turn of events.

"We want to continue manufacturing here," says Friederika Kaider, director of the city's Candy Institute, an industry retention project of the Center for Labor and Community Research.

But trends aren't promising.

"I don't know whether there will be a domestic hard-candy industry in 10 years' time," warns Greg McCormack, president of Bobs Candies Inc., an Albany, Ga., candy manufacturer that moved some 40 percent of its candy-cane production to Mexico just last year. "It's not a fun situation to be in."

For decades, Chicago's West Side claimed the factories that bespoke the nation's diverse mid-century industrial might. The area boasted a Westinghouse plant and a Playskool factory. But high costs and outmoded facilities forced those companies to close. Last year, Brach's Confections announced that it, too, would shut down its sprawling brick-faced plant by 2004, throwing some 1,100 Chicago-area employees out of work.

The company, which for years had turned out StarBrite mints, Milk Maid caramels, and Maple Nut Goodies, said it may contract out the work to manufacturers in Mexico or Argentina.

Labor costs and the need for modern facilities played a role in the company's decision. But the picture is complicated by Brach's reliance on high-priced American sugar.

For two decades, the US has supported its sugarcane growers in the South and sugarbeet producers in the North by sharply limiting imports. The policy is blatantly protectionist. But sugar farmers point out that most other countries subsidize growers, too.

The result is that many American and international consumers end up paying artificially high prices for sugar, while the remainder is dumped on world markets at rock-bottom prices.

Here in the US, consumers – including candymakers – pay at least twice the world-market price. That's why America's soft-drink makers long ago shifted from sugar to corn syrup to sweeten their beverages. Candymakers usually can't make that change, especially in high-sugar-content hard candy.

"Sugar is just one part of the total cost in the manufacturing of a candy product," says Steve Lodge, vice president of legislative affairs for the National Confectioners Association, based in Vienna, Va. "But because sugar is such an important ingredient in these products, it is a very significant factor."

For example, Kraft, based in nearby Northfield, Ill., pays half as much for Canadian sugar as for American. So when the company was looking to close its underutilized LifeSavers plant in Holland, Mich., it set its sights across the border. This January, Kraft announced it would move its traditional LifeSavers line to its Mount Royal plant near Quebec City.

The move, to be completed by next year, will mean the loss of 600 jobs.

US sugar producers don't buy the sugar-price argument, and insist it's a scapegoat for the appeal of cheap labor. After all, they say, the sugar differential has been around for decades.

"Kraft's not going to say: 'We're going to abandon America's workers for cheaper labor,' " says Joseph Terrell, a spokesman for the American Sugar Alliance, a trade association of sweetener producers and processors in Arlington, Va. If the company blames high sugar prices, "it's just easier for people to swallow."

Skepticism runs high among Chicago union leaders, too.

"They can blame sugar prices all they want," says Julio Lara, secretary-treasurer of Teamsters Local 738, which represents the Brach's workers. But "they're hurting the working people." For decades, Brach's provided stable jobs to more than a thousand Chicago workers. Mr. Lara worked at the plant for 10 years. Current union jobs there pay $13 to $20 an hour.

The company declined to be interviewed.

Already, the area's candy-related employment has fallen from 13,000 in 1998 to about 10,000 today.

And while not closing facilities here, some local companies – such as Ferrara Pan in Forest Park, Ill. – are expanding operations abroad. Other candymakers are not commenting. For example, Hershey Foods Corp. in Hershey, Pa., has announced it will close its Wheat Ridge, Colo., facility – maker of the mouth-puckering Jolly Rancher candies – by the end of the year. But the company refuses to say whether production will stay in the US.

For now, hard-candy manufacturing looks more likely to leave than chocolate manufacturing, because the former uses more sugar. "You're going to see tens of thousands of jobs leave this country – jobs that paid $10 to $20 an hour," says Mr. McCormack of Bobs Candies.

Productivity differences make it hard to compare wages between his US plants and his new Mexican facilities. But "sugar is just such an easy equation to make," says McCormack. He expects to save $2 million buying the sweet stuff south of the border.