Embassy Dairy Inc., one of only five remaining commercial dairies in Maryland, announced yesterday that it will close in early April and lay off the last of its 150 workers.
The 66-year-old Waldorf company's decision will eliminate one of the top employers in Charles County and could result in consumers' paying more for milk at grocery stores across the state, according to a company executive.
Embassy has struggled in recent years and filed for bankruptcy-law protection last May. Factory workers had hoped that a new owner and wage concessions of nearly $6,000 a year would be enough to save their jobs.
But the end came abruptly when Dallas-based Southland Corp., which operates more than 500 7-Eleven stores in the Baltimore-Washington area, said Thursday that it was taking its milk business from Embassy and awarding it to three other dairies.
"That was a big blow. That was more than 40 percent of our business," said Scott W. Andrews, chief financial officer of Protein Holdings Inc., Embassy's parent in Portland, Maine.
Andrews said Embassy's 25-acre processing plant and distribution center will halt production the first week of April.
Last May, Embassy lost a contract to supply milk and juices to 120 Safeway stores in the region. Andrews said the Safeway account represented nearly half of Embassy's sales.
It was the loss of the Safeway business that forced Embassy to file for bankruptcy-law protection.
Andrews said that, at its peak, Embassy produced about 32 million gallons of milk a year. He said a lot of that production will now go out of state.
While milk is currently being shipped into Maryland from other states at very competitive prices, Andrews said that could change in the future. And, he said, as Maryland becomes more dependent on out-of-state suppliers, milk prices could rise.
"When you take production out of the region," he said, "it puts more pressure on prices."
Aubrey Edwards, executive director of the Charles County Economic Development Commission, said Embassy's closing "will be a significant hit" to the region's economy. "They are one of our biggest employers."
The dairy's annual payroll is about $10 million.
Andrews blamed part of Embassy's financial woes on pressure from two fronts.
He said the plant was losing sales to milk processors in Pennsylvania and Virginia, which are able to undercut the market in Maryland.
The two neighboring states have price support programs that allow dairies there to grab a bigger portion of the Maryland market by selling their excess milk here at below-market prices.
"That puts any milk processor in Maryland in a difficult position," Andrews said.
Legislation aimed at eliminating the advantage enjoyed by processors in surrounding states was defeated in the General Assembly last year.
Andrews also blamed the closing on high labor costs at the Waldorf plant. He said labor costs were 20 percent to 25 percent higher than at the Cloverland Green Spring Dairy in Baltimore. Cloverland last year picked up the Safeway account.
Harry Stone, vice president of Teamsters Local 246, which represents the bulk of the Embassy workers, disagreed with the suggestion that the size of employees' paychecks forced the dairy out of business.
He said the union workers' base salary is "just under $30,000 a year." That is $4.50 to $5 an hour less than workers are paid at the Giant Food Inc. dairy in Jessup.
"It was a sad situation," said Stone. "That plant hasn't made money for 10 years."
He blamed the problems on inefficiencies due to outdated equipment and poor corporate planning that resulted in workers' being paid a lot of overtime.
In their attempt to keep the dairy going, Stone said employees agreed to give up 11.69 percent of their total compensation. For the 105 Teamsters members, that was $621,000 and amounted to slightly more than $5,900 a worker, per year.
In return for wage concessions, which affected all workers, including the dairy president, employees were to be given 51 percent ownership of Embassy. It was in the process of being acquired by a subsidiary of Bethesda-based American Capital Strategies.
D. Bradley Holland, president of Embassy, said the sale of the dairy fell through when Southland awarded its 7-Eleven contract to Lehigh/Tuscan Dairy in Pennsylvania, Marva Maid Dairy in Virginia and Dairy Maid Dairy Inc. in Frederick.
Margaret Chabris, a spokeswoman for Southland, said its contract with Embassy was scheduled to end in March. The company considered proposals from nine dairies, including Embassy, "and the other dairies provided a better overall package," Chabris said.
Pub Date: 2/21/98