OTTAWA (FNS) -- Gerber Products may get a second chance to sell baby food in Canada, following a trade tribunal recommendation to reduce dumping duties against the company.
The Canadian International Trade Tribunal, based here, originally slapped a 60% duty on jars of Gerber products imported from the company's plant in Fremont, Mich., following complaints of dumping by H.J. Heinz Co. of Canada Ltd., Toronto (see SN, Aug. 10, 1998). Gerber had been importing baby food from the United States since 1992, after it closed its plant in Niagara Falls, Ontario.
Gerber Canada, based in Mississauga, Ontario, initially pulled out of the Canadian market in September of last year rather than continue paying the duty. This left Heinz with a virtual monopoly in the $60 million ($42 million U.S.) jarred baby-food market. But the federal Competition Bureau, Gerber's partner in the case, continued to appeal to have the duties lifted for the benefit of healthy competition and for the sake of lowering baby-food prices.
After extensive public hearings, the trade tribunal reversed its decision in December 1998 and now recommends the duties be lowered by about two-thirds and that a floor price be set for jarred baby food to create some competition.
The tribunal's recommendation is now in the hands of the Department of Finance, also here. Although Gerber Canada is "gratified" with the outcome, it may not be enough to get its baby-food jars back on the market.
"Even with the two-thirds reduction, the duties will still be between 18 cents and 30 cents on a jar of baby food," Martin Lasher, Gerber Canada vice president, told SN. "It will be up to [Canadian] retailers to see if they want to carry our product at those prices."
Lasher said the duties also affect Gerber's other baby-food products indirectly, since most stores are reluctant to carry only a partial line.
Heinz Canada was "astonished" by the ruling because it recommended such a "substantial reduction" in duties, according to a company spokeswoman.
"There's a lot of analysis going into the ruling and the main issue for us is the future of our plant in Leamington, Ontario," Anna Relyea, Heinz Canada communications manager, told SN. "We hope the minister of finance will reconsider and maintain the original duty."
Heinz levied the dumping accusation last April after retailers started selling Gerber products for as little as 33 cents a jar, as opposed to Heinz' brand at 43 or 49 cents a jar. The company was forced to reduce production at its Leamington plant and lay off 50 of its 200 workers.
In other news, as part of a reorganization by its Swiss-based parent company, Novartis A.G., Gerber, based in Fremont, Mich., is undergoing a restructuring that will move a portion of its corporate jobs to Summit, N.J., and result in some layoffs.
According to Malesia Webb-Dunn, spokeswoman for Gerber, the baby-food maker's parent company is internally creating a consumer health division that will merge the Gerber business with its over-the-counter and medical nutrition businesses. The OTC business encompasses brand names sold to consumers, while the medical nutrition division sells products to hospitals.
On the manufacturing side, Gerber's 650 employees will remain in Fremont. There are 450 corporate employees, and some will be relocated to Novartis' headquarters in Summit. R&D people will remain in Fremont, Webb-Dunn said, but some other functions may move. Novartis expects that about 100 jobs will be lost among the three businesses.