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Farewell message on Frosted Flakes also a fitting epitaph for branch plants

It’s not unusual to find a surprise inside a box of cereal. Often it’s good, like a coupon or a little toy. Sometimes it’s something nasty, which warrants a stern letter to the manufacturer of said cereal.

And sometimes it's poignant, like the surprise high school teacher Stephane Gaudette got when he opened a box of Kellogg’s Frosted Flakes on Monday morning. The wax paper package inside contained this message:

“This is the very last bag of Canadian cereal for the Canadian market from Kellogg’s London Ontario plant. Fri. Dec. 5, 2014.”


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The bag was signed by three workers who’d been employed at the nine-decade-old plant between 24 and 29 years.

According to the London Free Press, Kellogg’s London plant shut down for good on Dec. 21, putting 500 people out of work. It made 27 cereals, including Corn Flakes, Frosted Flakes, Special K and Rice Krispies. Production was moved to the U.S., though Kellogg’s still operates another plant in Belleville, Ont.

Gaudette, who teaches historyin the northern Ontario town of Timmins, immediately put the bag aside and found a different cereal for his family to have.

“It’s very personal and that’s why I didn’t want to open up the bag,” he told Yahoo Canada News in an interview Monday.

This is the very last bag of Canadian cereal for the Canadian market from Kellogg's London Ontario plant.
This is the very last bag of Canadian cereal for the Canadian market from Kellogg's London Ontario plant.

“It was on my mind all the way to work. I couldn’t just leave it there and let it sit in the cupboard and not do anything about it. So I took a few pictures before I left [and sent them to the Free Press].”

The story triggered a wave of interest from additional media and readers. There were hundreds of comments on the Toronto Sun's version of the Free Press story, a lot of them aimed at the provincial government.

Gaudette is rejecting suggestions he cash in on his chance discovery by selling the historic cereal package on eBay. He plans to keep it for his family.

“I find it personally a little bit crass to make money off of a certain article like that where 500 jobs were cut,” Gaudette said, though he hasn’t ruled out donating it to a museum.

Timmins is a resource town and his students come from families who’ve seen their share of mine and mill closures, he said.

“First thing that crossed my mind when I read the message was I’d really like to meet these people and shake their hands,” said Gaudette. “I don’t know if I can say I’m sorry . . . I found it kind of bittersweet.”

Plant closures rattle Canadian psyche

Plant closures, especially those owned by foreign-based companies, trigger a lot of public emotions, playing to our deep-seated image of Canada as a branch-plant economy.

Whether it’s the shuttering of an auto plant, closure of a chocolate factory or the loss of a historic ketchup maker, such closures reinforce the view that Canada can’t sustain a healthy manufacturing sector and is destined to make its living pulling things from the ground, whether minerals, oil or trees.

But business historian Joe Martin considers that mindset outdated. While the job losses from a shutdown can be tragic for those directly affected, the loss of another branch plant is not a reason for hand-wringing.

“I don’t think so,” said Martin, director of the Canadian Business and Financial History Program at the University of Toronto’s Rotman School of Management. “I think we should say what can we do differently now?”

Roots of the 'branch-plant economy'

The Canadian and global business landscape is much different from the world that gave birth to the branch-plant economy and its attendant psychology, Martin said in an interview. It grew out of Canada’s failed attempts to negotiate free trade with the United States in the 1870s.

Sir John A. MacDonald created a tariff regime under his National Policy in an effort to get the Americans back to the bargaining table, said Martin.

“The tactic was totally unsuccessful,” he said. “The Americans continued to have higher and higher tariffs.”

Despite attempts to de-escalate, most notably Sir Wilfrid Laurier’s failure to win support in Parliament for a limited free-trade deal in 1911, the barriers largely remained until the Second World War.

“The branch-plant thing is a legacy of the protective tariff,” said Martin. “The only reason those plants were there was to get around Canadian tariff barriers.

“The plants didn’t make sense in the first place and they certainly don’t in this day and age when manufacturing has become so global.”

In a world of globalized and increasingly free trade, localized production often doesn’t make economic sense.

“I’m an Adam Smith economist,” said Martin. “What’s your comparative advantage and that’s where you should go. What are you good at?”

Canadian manufacturing actually doing well?

The irony, according to Martin, is that Canada’s manufacturing sector is doing better in most ways than media reports lead people to think. Executives he's been speaking with all express optimism.

The country's financial system is solid, especially after regulatory improvements developed in the 1980s. And contrary to popular belief, there’s been no shortage of entrepreneurs who’ve grown successful businesses to international prominence, he said.

Critics will point to notable failures, such as the collapse of Nortel and the retreat of tech darling Research In Motion, companies that grew very big, then lumbered into trouble.

“The missing ingredient is sophisticated management of large enterprises,” said Martin. “We haven’t had that.”

The reason partly goes back to those historic tariff barriers, he pointed out. Companies safe behind protective walls were being run by employees of large multinationals with a different head-office culture.

“All that is changing now and you are getting successful examples,” said Martin.

He pointed to auto-parts giant Magna International, founded 55 years ago by Austrian immigrant Frank Stronach, with 20,000 employees in Canada and 125,000 worldwide. Stronach was a singular figure but he left a strong team of very sophisticated mangers in place when he retired, Martin said.

Another is Alimentation Couch-Tard, a Quebec-based convenience store empire that employs 60,000 thanks to a confident international expansion strategy led by until last fall by founder and CEO Alain Bouchard. It’s now the second-biggest specialty retailer in the U.S. and the biggest in northern Europe, said Martin.

We’re also inclined to ignore success stories like Onex Corp., the private equity company founded by Gerry Schwartz, which manages dozens of businesses worth more than $20 billion, he said.

Adapt or die

People often garble Charles Darwin’s central thesis on evolution, reducing it to “survival of the fittest,” when his research actually demonstrated that it’s actually about the survival of the most adaptable.

“That’s what you’ve got to be, especially in this economy,” Martin said. “Are you prepared to accept the challenge and do something about it?”