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Baskin-Robbins says it regrets the pain the closing of its Ontario plant would cause.Galit Rodan/The Globe and Mail

As much of the country swelters in a heat wave, the Baskin-Robbins plant in Peterborough, Ont., has been busier than ever, churning out the company's 31 flavours for ice cream shops across Canada and around the world.

But Wednesday morning, the world's largest ice cream chain shocked the Peterborough plant's 80 workers and announced plans to shut their workplace down, shifting production to subcontractors in Alabama and Nova Scotia.

The problem certainly wasn't a lack of demand, the company says. Rather, the opposite: The town's ice-cream factory, for decades a fixture in Peterborough, has been operating at peak capacity.

But this has left the company "struggling to keep up,"said Peter Laport, Baskin-Robbins' vice-president for its global supply chain. And, he said, it did not make economic sense to modernize and expand the Peterborough plant to accommodate increasing demand, partly because there is no room on the site to grow.

Mr. Laport said the company, based in Canton, Mass., and part of Dunkin Brands Group Inc., regretted the pain the decision would cause its employees. The company pledged to offer severance packages, counselling and "résumé support."

"We're making sure that we are taking care of our employees. We are going to provide the softest landing we can," Mr. Laport said.

He said the decision was necessary as the company sees increasing international growth. In addition to supplying Canada's 113 stores, the plant supplies about a third of the 4,200 Baskin-Robbins shops outside the United States.

As of Sept. 28, most of the plant's ice cream destined for Baskin-Robbins stores overseas will be produced instead by Dallas-based dairy giant Dean Foods, at a plant in Alabama, which already produces Baskin-Robbins products.The smaller shipments of ice cream bound for Canadian stores will now be made by Scotsburn Dairy Group in Truro, N.S., also an existing Baskin-Robbins supplier.

The closing will complete the company's shift away from actually producing its own ice cream in North America. It moved all of its U.S. ice cream production to third-party suppliers about a decade ago.

The company says closing the Peterborough plant will cost it $16-million to $18-million initially in one-time charges, but shifting production elsewhere will save it $4-million to $5-million a year.

Instead of actually producing its own ice cream, Baskin-Robbins says it will focus on "innovation," in the form of new flavours and new products, as well as marketing and supporting its franchising system.

Mr. Laport said the shift of the bulk of the plant's output to Alabama was not about slashing wages, which he said only account for 6 per cent of costs. He said the savings come from bringing production closer to the U.S. sources of its milk and other raw materials.

"This isn't a story about labour … We say we need to be where the cows are, near where our ingredients are."

Charles Redden, president of Canadian Auto Workers Local 462, which represents about 45 of the Baskin-Robbins workers in Peterborough, said union members were "devastated." Talks are set to begin Monday on severance packages. He said he was reluctant to criticize the company before those talks begin. And he said he did not know what wages were like at the plants in Alabama and Nova Scotia.

Mr. Redden said the median unionized wage at the plant was about $25 an hour. Company officials called that "slightly high," and said pay ranges from $15 to over $25.

Employees have been given the rest of the week off to digest the news.

Mr. Redden pointed out that Baskin-Robbins was profitable and that there was certainly no lack of work at the plant: "The place is maxed out. The employees were putting in a lot of hours ... Look at the summer we're having. I mean, we're talking ice cream here."

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