Nestlé USA, the maker of such well-known products as Toll House cookies, Lean Cuisine dinners and Hot Pockets, is shifting its U.S. headquarters from Glendale to Rosslyn, Virginia, a move that will take away about 750 jobs.
Additional consolidations within the company will transfer another 300 jobs from Glendale to Ohio and more to St. Louis. All told, the city will lose about 1,200 jobs.
The move is scheduled to begin this summer and be completed by the end of 2018.
Move logistics driven
California businesses have long complained about the state’s unfriendly business climate. But Nestlé USA says its move to Arlington County in Virginia is largely being fueled by logistics. Seventy-five percent of its factories and 85 percent of its top customers are located in the eastern half of the United States, the company said, and 80 percent of its products are sold east of the Mississippi River.
“We carefully considered a number of options and Arlington hits all the marks,” Nestlé USA Chairman and CEO Paul Grimwood said in a statement. “Not only is it attractive to our current employees while offering a great talent pool for the future, but this location allows us to be closer to our business operations, our customers and other important stakeholders.”
Virginia’s big incentives
And it doesn’t hurt that sizable incentives were thrown into the mix.
The Washington Post reports the state of Virginia is offering $10 million in cash grants to Nestlé, including $6 million as a Commonwealth Opportunity Fund and $4 million from a Virginia Economic Development Incentive Grant. Arlington County is offering another $6 million in incentives as well as additional money for relocation assistance and training of new employees.
It’s unlikely that a large number of workers at the Glendale facility — which occupies 16 of the 21 floors at 800 N. Brand Blvd. — will opt to transfer to Virginia, Ohio or Missouri. But the option is open for those who want to make the move, according to Nestlé spokeswoman Edie Burge.
“Not everyone will choose to go,” she said. “If they don’t they will receive outplacement help in finding new jobs.”
Nestlé USA, which generated sales of $9.7 billion in 2015, will be moving its technical/production organization and supply chain teams to join the Nestlé prepared foods, pizza, baking and professional businesses in Solon, Ohio. The remaining information technology employees will go to Nestlé Purina PetCare’s U.S. headquarters in St. Louis.
Jobs center to help displaced workers
Darlene Sanchez, Glendale’s deputy director of community development, said the city didn’t hear of the pending move until early Wednesday.
“We found out on the news like everyone else, but it wasn’t a big surprise,” she said. “When they did their most recent lease extension we knew there was a likelihood that this could happen. But we have our Verdugo Jobs Center here to help get these people back on track.”
Judith Velasco, director of the Verdugo Workforce Development Board, which oversees the center, said they are ready to help.
“We really engage with businesses and develop meaningful programs to provide skills that are relevant for people who will be unemployed,” she said. “We also have a grant-funded rapid response program with a dedicated staff and team, so we’ll reach out to Nestlé’s HR department to see if we can speak to the impacted workers.”
Velasco said the center can help displaced workers fine-tune their resumes, and it can also provide workshops and training skills — all at no cost.
City sees opportunity
The city is sorry to see Nestlé USA go, Sanchez said, but it views the company’s departure as an opportunity.
“We just completed a study two weeks ago, which shows that we have more than 1,000 businesses in Glendale that are tech-focused,” she said. “We’d like to see some more co-working space that would cater to this burgeoning technology industry that has organically grown here.”
Sanchez said the city has a diverse makeup of businesses, and that has worked to bring vacancy rates down.
Four years ago we had a 25 percent vacancy rate in office space, but now we’re down to 10 percent,” she said. “We know how to overcome.”
William W. Roberts, former director of the San Fernando Valley Economic Research Center, said the city will feel a significant impact of job losses in the short term. But the space, he said, will eventually be filled, whittling down those losses.
Nestlé under fire
Nestlé has come under fire for removing millions of gallons of water from the San Bernardino National Forest to be processed, bottled and sold during California’s drought. Christopher Rieck, a spokesman for Nestlé Waters North America, said a federal judge rejected a lawsuit by The Story of Stuff Project and others, ruling that the U.S. Forest Service can continue to move forward with the permit-renewal process related to the company’s Arrowhead brand.
The Story of Stuff Project and others filed an appeal to the Ninth Circuit Court of Appeals in November and the Forest Service is considering the path it will pursue under the National Environmental Policy Act as it considers the renewal of Nestlé’s special use permit.
Incentives’ role
And those incentives? They likely helped sway Nestlé’s decision to move.
“Without the incentives they probably wouldn’t be moving,” he said. “But you have to look at whether that pays off in the long run. Historically, many companies will move for incentives. But when that runs out and someplace else offers more incentives … they might move again.”
Roberts said California’s costly taxes, mandates and other requirements have made the Golden State a tough place to do business, and it’s not looking like that will change anytime soon.
“I’ve been here for over 40 years and I’ve always heard about how unfair California is to businesses and how they are trying to improve that,” he said. “But every year it’s the same thing. It’s not a place that attracts companies because it’s so hard to do business here.”
Nestlé USA is a division of Vevey, Switzerland-based Nestlé S.A., the world’s largest food company. It posted sales of $92 billion in 2015.
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