Meggle said it is in the process of optimizing its overall business operations and strategies, which includes setting up long-term sustainable business models in all markets in which it operates.
The company has a presence in several eastern European countries.
As a result of this, a decision was made to restructure business operations in Croatia and shut down the production facility in Osijek by the end of the year. Effective January 1, 2021, Meggle will be present in Croatia with a new, differentiated business model.
The decision to restructure business operations in Croatia and shut down the production facility in Osijek was made due to challenges and crises faced over the last several years, which all had a negative impact on business, the company said, including the aflatoxin crisis, the Agrokor crisis and the latest coronavirus crisis, which is still in effect.
Meggle said it will act socially responsible towards its employees in this process, and ensure fair severance packages in cooperation and social dialogue with all relevant institutions, especially employees.
The decision to shut down the production facility has been postponed several times in recent years, in the hope that business conditions and circumstances would improve, and it was made only when all other options were explored. Meggle invested more than HRK130m ($19.7m) in production and business in Croatia in the last 15 years.
Meggle will terminate cooperation with its producers and suppliers in accordance with the decision to shut down the production facility. However, it said it will fulfill all contractual obligations.
The demand for raw milk on the Croatian market is significantly higher than the supply, and Meggle will help its suppliers, including 200 small rural households, to find new buyers as soon as possible.
Government responds
Following the announcement of the factory closure, Croatia's Ministry of Agriculture is monitoring the situation in the dairy sector and will soon meet with representatives of leading dairy industries, the country's Agriculture Minister, Marija Vučković, said.
The Minister said 340 dairy farms with a total production of about 26m kilograms of milk are affected, or about 6% of the total amount of milk that is delivered annually to Croatian dairies.
"The Ministry of Agriculture will carry out all necessary activities and make all efforts with the aim of preserving milk production on the farms of Meggle subcontractors," she said.
The Croatian Chamber of Agriculture, the HPK, said Meggle's announcement was a new blow to domestic milk production, which has been declining continuously for more than 10 years.
"A large number of producers have given up production, and the self-sufficiency of milk production in Croatia has dropped to about 40%," the HPK said.
In 1996, Meggle entered the Croatian market through its distribution center and office in Matulji. Three years later, local production started, through cooperation with the Osijek dairy farm IPK Mia, from which Meggle Mia d.o.o. was created.
In September of 2004, Meggle Mia d.o.o. merged with the dairy farm IPK Mia d.d., with business continuing as one company under the new name of Meggle Osijek d.d. At the end of following year, the production facility at Meggle Osijek d.d. was merged with the sales company Meggle Adria d.o.o.