Tnuva Readying to Lay Off 8% of Its Workforce as Sales Slump

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Making cheese on a Tnuva production line.A woman attends to a machine that packs pre-sliced cheese as a man seems to be checking a computer monitor or an operating panel.
Making cheese on a Tnuva production line.Credit: Gil Eliahu

Tnuva, the dairy maker controlled by China’s Bright Food, is introducing a cost-cutting program that will eliminate up to 8% of workers, as the company copes with declining sales and profits.

In a letter to employees this week, Tnuva’s new CEO, Eyal Malis, said he planned to lay off between 400 and 500 employees over the next two years to “adapt the company’s structure to the changing business reality in the food retail sector.”

As the head of an iconic Israeli company — it was founded in 1926 as a farmers’ cooperative — now owned by foreigners, Malis is in a sensitive situation. His predecessor, Arye Schor, was forced to step down two months ago at the behest of Bright Food amid disappointing profits and a crisis of confidence with the Chinese company.

In the letter, Malis denied that Bright Food dictated the number of layoffs but said the company expected Tnuva’s management to set growth targets and implement efficiency measures.

He also promised to coordinate the layoffs with Tnuva’s union representatives.

The first step of Tnuva’s efficiency drive, sources said, will be merging its meat, fish and egg operations with the unit that manages its branded products in Maadanot bakery products, Sunfrost frozen vegetables and processed meat under the Tirat Zvi brand.

Bright Food, which acquired Tnuva a year ago at an 8.5 billion-shekel ($2.6 billion), was quickly greeted with disappointing financial results after price controls were imposed two years ago on soft cheese and sweet cream, two key products for the company.

As a result, revenue dropped 5.2%, to 6.8 billion shekels in 2014, and net profit plunged to 407 million shekels, from 518 million shekels in 2013. Earnings before interest, taxes, depreciation and amortization fell by 7.3%, to 793 million shekels.

For 2015, Tnuva is expected to see Ebitda drop an additional 15% to 20% in the wake of an easing of import restrictions on hard cheese, which generates 800 million shekels of sales for Tnuva in a typical year. The company has also been facing increased competition from private label brands being sold by Super-Sol, Israel’s biggest supermarket chain.

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