Yomo takeover by Granarolo saves jobs

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In March 2004, Yomo, an Italian yoghurt manufacturer, was saved from bankruptcy by an agreement for it to be taken over by the Granarolo dairy products group. An important role in the takeover negotiations was played by both trade unions and the provincial administration of Milan. The takeover deal, though important issues are still to be decided, appears to have saved the jobs of Yomo's 800 employees.

Yomo is one of the best-known Italian brands of yoghurt, of which the company was the first producer in the country. It was founded in 1947 by Lunir Vesely, the inventor of 'homogeneous coagulate yoghurt' and its industrial-scale manufacture. The company, which has always been run by the Vesely family, achieved its greatest growth in the 1990s. Today the group controls various brands - Torre in Pietra and Mandriot (yoghurts), Merlo (cheeses), Pettinicchio (dairy products), the Centro Sperimentale del Latte (production of milk enzymes) and LeoMarven System (services for sales and distribution). The company’s plants and production sites, with 800 employees, are located at Pasturago di Vernate and Zelo Buon Persico in Lombardy, at Acqui Terme in Piedmont, at Latina in Lazio, while it has seven other locations in Italy, which are also the nodes of its commercial network.

Financial difficulties

In the past three years, with the entry into the Italian market of European and extra-European competitors, Yomo has run into increasing difficulties, losing an ever greater share of the yoghurt market: 2003 saw a loss in share of around 3 percentage points on the previous year (a decrease from 16.9% in 2002 to 14% in 2003 - figures from Information Resources). An industrial reorganisation plan launched in 2002 by the former managing director, Francesco Pugliese, did not achieve the results expected. The group’s accounts continued to worsen, and in the early 2004 losses have assumed alarming proportions. It is estimated that the group, which invoices for goods worth EUR 200 million per year, at present has debts amounting to around EUR 100 million to suppliers and banks. The financial difficulties of recent years forced the Vesely family to lodge 95% of Yomo shares as security with Banca Intesa, one of the largest Italian and European banking groups, for loans which expired at the beginning of March 2004 and pushed the entire company to the edge of bankruptcy.

Because of severe financial shortfalls, in February 2004 Yumo failed to pay the wages of workers at its largest plant, situated at Pasturago di Vernate near Milan. Moreover, in recent months, production has been intermittent because of a lack of raw materials. Of the 350 employees or so at the plant in Pasturago di Vernate, 70 have been placed on the special Wages Guarantee Fund (cassa integrazione straordinaria) and 210 on the ordinary Fund (cassa integrazione ordinaria) (IT0311306T) for three days a week. At the dairy plant in Pettinicchio di Latina, around 50% of the 150 workers are on the special wages guarantee fund.

Takeover deal

Faced with this dramatic productive and financial situation, the political institutions of the provinces in which the group’s four plants are situated, as well as the trade unions, took action to avert the bankruptcy of Yomo with the consequent job losses for its 800 employees. For several months, the Vesely family had been conducting negotiations for the sale of the group to various potential purchasers - among them the Italian Granarolo group and the French multinationals Lactalis and Danone- but without reaching agreement. This situation of continuing uncertainty prompted the provincial administration of Milan to intervene directly in order to accelerate negotiations on the sale, while the food sector trade unions called a day of industrial action (on 15 March 2004) and set up 'permanent assemblies' at the Yomo group’s four production sites. The unions concerned are the Agricultural, Food, Environmental and Industrial Federation (Federazione agricola alimentare ambientale industriale, Fai-Cisl) affiliated to the Italian Confederation of Workers' Unions (Confederazione italiana sindacati lavoratori, Cisl), the Federation of Agro-Industrial Workers (Federazione lavoratori agroindustria, Flai-Cgil) affiliated to the General Confederation of Italian Workers (Confederazione generale italiana del lavoro, Cgil) and the Italian Agro-Food Workers' Union (Unione italiana lavoratori agroalimentare, Uila-Uil) affiliated to the Union of Italian Workers (Unione italiana del lavoro, Uil).

Thanks to this pressure and awareness-raising action, a breakthrough came at the end of March with the announcement of a framework agreement for the takeover of Yomo by the Granarolo group. The aim, according to Granarolo's chair, Luciano Sita , is 'rapidly to restore the company’s normal commercial and industrial activity, guaranteeing current employment levels at all the group’s production sites'. Given Yomo’s financial situation, a procedure began - with the approval of Fai-Cisl, Flai-Cgil and Uila-Uil and the unitary workplace union structures (rappresentanze sindacali unitarie, Rsus) (IT0309304T) at the group’s four plants - for ratification by the Pavia courts of a deal with the company's creditors (known as a 'concordato preventivo', an arrangement whereby the debtor can avoid declaring bankruptcy by placing all its assets at the disposal of its creditors, under the terms of Bankruptcy Law, RD 16.03.42). If the deal is accepted by the courts, for the necessary period a leasing contract will be awarded to the companies concerned so that production and commercial activity can continue uninterrupted. Under this agreement, the Yomo workforce will be transferred to a new company specially created by Granarolo. They will maintain all their acquired rights, and all previous agreements will remain valid. Talks have also begun between the probable new owners and the trade unions in order to address the most immediate problems at all the plants involved.

Granarolo, whose core business is the production and sale of fresh milk, is an Italian market leader in the dairy products sector. It belongs to the Granlatte Consortium and in its turn controls a number of other companies - Centrale del Latte of Milan, Sail, Calabrialatte, Vogliazzi, Agriok, and Area 2003. The group has a total of 1,315 employees, and it operates 11 production plants and more than 100 distribution centres in every part of the country. In 2003 it achieved sales amounting to EUR 731 million and profits of EUR 20.2 million. When completed, the takeover of Yomo will create major changes in the Italian market for yoghurt: Danone at present has a 35% market share in large-scale retailing, Muller 16.5% and Granarolo 3.1%, which with the takeover of Yomo could rise to 17.1% (figures from Information Resources).

Reactions

The chair of the Granarolo group, Mr Sita, has stated that, although some parts of the takeover agreement are still to be decided, 'the route to restoring all the plants to normal industrial and commercial activity has been marked out. For the Granarolo group, the takeover accords perfectly with its mission to valorise the high quality of Italian agro-food products.'

The provincial labour councillor of Milan, Cosma Gravina, who closely followed the negotiations between the Granarolo group and the Vesely family, has praised the takeover agreement, highlighting its key points for the area: 'According to the business plan proposed by the chair of Granarolo, the group’s main plant will remain in the Milan area, and it will increase its daily output. Moreover, the new Yomo company will continue to rely on Lombardy milk producers, thereby guaranteeing the future of the region’s substantial system of subcontracted and outsourced dairy activities.'

The trade unions concerned have expressed cautious satisfaction. The secretary of Flai-Cgil gave a positive verdict on the agreement 'because it brings a period of great uncertainty to an end, and should be a positive solution for the workforce’s problems. However, it will only be possible to reach a definitive verdict when Granarolo has issued its industrial restructuring plan for all the group’s plants.' The same opinion was expressed by the secretary of the Milan Fai-Cisl organisation, Massimiliano Albanese, who had previously argued that a solid purchaser must be found for Yomo in order to prevent the dispersal of industrial assets of great value: 'The agreement with Granarolo may revitalise all the Yomo group’s production sites and thereby ensure the stability of employment. However, this will only come about when the deal with creditors has been put in place. For this reason, the Rsus at the plants located in Pasturago di Vernate, Acqui Terme and Latina will continue their permanent assemblies until that time.'

Commentary

2002 and 2003 were a period of considerable difficulty for Italy's industrial system, which consists largely of small and medium-sized enterprises. According to the results of a survey conducted by the Italian Institute of Statistics (Istituto italiano di statistica, Istat), in January 2004 the turnover of Italian industry fell by 0.6% on the previous month (seasonally-adjusted figures) and by 6.5% on January 2003 - the worst downturn in sales since 2001. Similarly, orders in the industrial sector fell by 3.7% on December 2003 (seasonally-adjusted figure). These difficulties facing the Italian production system have also been highlighted by a recent study carried out by Cgil, which finds that in the first three months of 2004 applications were made by 486 companies to use the special Wages Guarantee Fund for their employees (the special Fund is a measure intended to handle serious labour surpluses, and it usually intervenes in the event of structural crises, not during periods of financial difficulty), which was 28% of the overall figure for 2003. The study also reports a considerable increase compared with the previous year in the number of firms declaring bankruptcy or going into temporary receivership (already 149 cases in the first three months of 2004, compared with 331 cases recorded in the whole of 2003).

The Yomo episode - which runs counter to this negative trend - highlights problems in Italy’s industrial system vis-à-vis the challenges raised by the internationalisation of markets and increasing competition at both national and international levels. However, on the other hand it shows that concerted action by employers, local authorities and trade unions can positively influence the search for shared solutions even in situations of severe financial and productive difficulty.

Seizing the opportunities offered by continental markets and the opening up of international ones, while pursuing the shared goal of buttressing and improving the competitiveness of the Italian industrial system, may therefore be a major test for the capacity and determination of the actors involved in change - government institutions, employers’ associations and trade unions - to find suitable and shared solutions. (Diego Coletto, Fondazione Regionale Pietro Seveso)