DES MOINES, Iowa (AP) — Kraft Heinz secured millions in tax breaks from Iowa economic officials on Thursday for a new plant in Davenport, one day after the food company announced it planned to close seven factories in the United States and Canada as part of a downsizing that will eliminate 2,600 jobs.
The Iowa Economic Development Authority board approved $1.75 million in tax credits and a $3 million forgivable loan. Kraft Heinz, formed by a recent merger, said it will use the financial assistance package to demolish its current plant in Davenport and build a new facility several miles away. The company intends to spend $203 million in the process. Even with the new plant, hundreds of jobs will be lost.
Davenport's current plant, which manufactures Oscar Mayer products and is touted as the world's largest bologna factory, is one of several that the company will shutter over the next two years. That's part of a restructuring plan to save $1.5 billion in operating costs by the end of 2017. The others slated for closure are in California, Maryland, New York, Pennsylvania, Wisconsin and Ontario.
H.J. Heinz Co. announced in March it would buy Kraft to create Kraft Heinz. The company, now based in Chicago and Pittsburgh, has brands including Capri Sun, Jell-O, Kool-Aid, Lunchables, Maxwell House, Planters and Velveeta.
The construction of a new manufacturing plant in Davenport is considered a victory for Iowa officials, who competed with another state to secure a home for the new facility, according to the documents the board reviewed before approving the tax breaks. The documents did not specify the other state.
More than 1,200 workers are currently employed at the downtown Davenport plant, which was built in 1915. City officials say the new plant could retain at least 475 full-time jobs. Bruce Berger, director of Davenport's economic development office, said officials empathized with employees who would be affected.
"We are glad that Davenport, Iowa, was able to successfully compete for a new, state-of-the-art manufacturing facility that will certainly position it for future growth," Debi Durham, director of the Iowa Economic Development Authority, said in a statement.