Hershey plans to close its Dot's Pretzels factory in Velva, North Dakota, as the company looks to cut costs and increase production capacity at other locations in its manufacturing network.
The closure will impact 27 employees, who are being offered the chance to relocate to select plants in the Hershey manufacturing network or accept severance packages when the plant ceases operations Oct. 27. The company currently operates seven manufacturing sites in the U.S., according to its website.
"Due to the physical limitations of the building and cost associated with the Velva facility, it has led us to the hard decision to cease operations and close the facility," a company spokesperson said in an email.
Production at the Velva site, which made up a "small percentage of the total volume," will be redistributed across Hershey larger manufacturing network, the spokesperson said.
The CPG giant bought Dot's Pretzels brand and its Velva facility in 2021 for $1.2 billion. The brand, which originated as a family-owned business in North Dakota, represents 55% of the pretzel food category, Hershey said at the time of the acquisition.
The acquisition was part of a wider push by Hershey to grow its owned manufacturing footprint through M&A deals.
In April, the company bought two facilities from Weaver Popcorn Manufacturing, a contract manufacturer and co-packer for its Hershey's SkinnyPop brand. Hershey took over Weaver's sites in Bethlehem, Pennsylvania and Whitestown, Indiana as part of the deal.
The strategy is also integral to its "better-for-you" initiative to offer low- or no-sugar, organic and bite-size offerings in a bid to generate up to $1 billion in additional revenue. As part of the strategy, the company acquired confection company Lily's for $425 million in 2021.
And late last year, the company announced plans to grow its manufacturing arm in its hometown of Hershey, Pennsylvania, where it plans to build a 250,000-square-foot facility to produce Reese's and Kit Kats.