While Kraft Heinz is closing several plants across the country, the food giant is investing more than $100 million in Minnesota, expanding its New Ulm plant to churn out a lot more Velveeta.
The expansion is expected to add 50 jobs at the plant, which already employs nearly 400. Plus, about 90 Kraft jobs will be saved because of the expansion, said Brian Tohal, coordinator of the nonprofit New Ulm Economic Development Corp.
He said those 90 jobs would have been shed because Kraft Heinz recently lost a large contract. But with the expansion, Kraft will add production.
Tohal called the expansion “huge” news for New Ulm, a city of 13,500 about 75 miles southwest of Minneapolis. With Kraft Heinz in the midst of big cost reductions, the city thought its plant might be on the chopping block, too, Tohal said.
“There was some nervousness in the community,” he said.
The New Ulm plant processes cheese for Kraft Deli Deluxe slices and for other products, including “Handi Snacks" — concoctions of crackers and cheese. With the expansion, the plant will again be churning out retail Velveeta, Kraft’s famous processed cheese.
In 2012, Kraft moved production of Velveeta to a plant in Illinois, though it still makes bulk Velveeta in New Ulm. The loss of the retail Velveeta line and a multimillion-dollar automation project led to major job cuts at the New Ulm plant, Tohal said. The plant had employed about 550 workers in 2012.
Kraft Heinz, based in Chicago and Pittsburgh, also employs nearly 100 at a cheese ingredient plant in Albany, Minn., near St. Cloud.
The New Ulm plant, which has been open since 1955, is the city’s third-largest employer, after a 3M factory and the New Ulm Medical Center, which have about 700 and 600 workers, respectively.
Kraft Heinz originally unveiled the expansion this winter. On Friday, the Minnesota Department of Employment and Economic Development formally announced that it’s supporting the expansion with a $450,000 “forgivable” loan. The loan will be forgiven if the giant packaged food company meets its hiring and investment goals.
New Ulm is kicking in $113,000 for the expansion: $20,000 in cash and a 3.8-acre tract of land worth $93,000.
The new jobs created by the expansion will pay an average starting wage of $22.16, according to Kraft and the state. Prep work for the expansion has started, and Kraft Heinz said it expects the new production lines to be up and running by the end of 2017.
Kraft Heinz is one of the largest U.S. packaged-food companies, a product of recent consolidation in the industry. Private-equity company 3G Capital, along with mega-investor Warren Buffett, bought Pittsburgh-based ketchup-maker Heinz in 2013 for $23 billion. The duo last July engineered a Heinz merger with Chicago-based Kraft for about $50 billion.
3G is known for aggressive cost-cutting, and in November Kraft Heinz announced plans to close seven North American factories, eliminating 2,600 jobs. Other packaged food companies, including Golden Valley-based General Mills, have also shuttered factories over the past two years as sales have stagnated.