Despite strong profits, Farmer Bros. gives up on CA

farmer-brothers-logoA highly profitable coffee distribution and production company with deep roots in Los Angeles County and a national clientele is closing its primary Los Angeles facility and preparing to move to Texas or one of several states promising lower taxes, fewer regulations and cheaper land.

Farmer Bros., founded in Los Angeles in 1912, notified Torrance officials on Feb. 5 of its plans in coming months to lay off about 350 workers, in compliance with a state law requiring advance notice of significant workforce cuts. The company’s 49,000-square-foot headquarters is on South Normandie Avenue in Harbor Gateway in southwest Los Angeles, but its corporate mailing address is in nearby Torrance.

Farmer Bros. stock has yo-yoed in NASDAQ trading in recent years, but it is considered a durable, well-positioned survivor in its primary business of providing coffee to national restaurant chains, convenience stores, Las Vegas casinos and corporate break rooms.

In the fiscal year ending June 30, 2014, the company reported net sales of $528 million and gross profits of $196 million.

It got a big boost in 2012 when it added McDonald’s to its client list. But its 2009 moves to buy the Coffee Bean chain and the restaurant-delivery branch of the Sara Lee company proved a drag on Farmer Bros. for years as it struggled to integrate its new resources and streamline operations. Coffee Bean also suffered because of Farmer Bros. slowness to offer specialty and exotic coffees that drive up profit margins at Starbucks, Peet’s Coffee and other competitors.

The company plans to maintain a distribution center in California while building “new state-of-the-art manufacturing, distribution and corporate headquarters facility designed to make the company more competitive and better positioned to capitalize on growth opportunities” in a less expensive state.

The estimated operational savings are $12 million to $15 million a year, according to a Farmer Bros. statement.

The cost of relocation is expected to be mostly covered by the sale of the Normandie Avenue site purchased in 1961 that is now home to corporate headquarters and production facilities. The county’s estimate of the property’s value is $22 million, but a Farmers Bros. spokesman told South Bay reporters that the company believes it can get $28 million to $35 million for the site.

15 comments

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  1. SkippingDog
    SkippingDog 8 February, 2015, 13:08

    So Farmer Bros. is chumming Texas and some other states for tax breaks and financial incentives to subsidize their need for a new, modern factory. Why CWD would applaud such rent seeking is a mystery.

    Reply this comment
    • SDVeteran
      SDVeteran 9 February, 2015, 13:11

      SkippingDog… sounds like you have never shopped for a bargain. Nor do you have any idea about creating revenue for a state. Texas and other states aren’t giving “tax breaks.” One state has lower corporate taxes and offers smart incentives to create jobs. That allows a state to collect even more in tax dollars via payroll income tax, new homes (by the workers) and other tax revenues by bringing in new companies.

      Reply this comment
  2. Michael
    Michael 8 February, 2015, 16:10

    tick tock tick tock, Jerry the mess of your making is coming soon.

    Reply this comment
  3. Ulysses Uhaul
    Ulysses Uhaul 8 February, 2015, 23:00

    Uly loves your business!

    Moving is purifying-

    Reply this comment
  4. Guillermo el Oso Poderoso
    Guillermo el Oso Poderoso 9 February, 2015, 08:38

    Yup-another DOOMER big employer is saying ‘hasta la vista’ to the Golden State. I’m sure UHaul is ecstatic. Like with a sharp-tounged spouse, love of California dies a death of a thousand cuts. Inspections, fees, taxes, hassles. Till you reach the event horizon, and you find yourself on the road heading east or north, never to return. I really think the progtard elite and their loyal minions consumed too much acid a while back and have become a death cult. Fun and sad to watch the entire edifice tip over from a distance..

    Reply this comment
    • Dyspeptic
      Dyspeptic 9 February, 2015, 12:35

      William the Powerful Bear, you seem powerfully bearish about Crazyfornia. Please stand well back from the state line though. When the House That Jerry Built collapses, the debris cloud will cover a vast area of the Western U.S.

      Reply this comment
  5. Michael
    Michael 9 February, 2015, 10:17

    They are not cheerleading. They are reporting that a profitable business has decided it would be to their own benefit to leave Taxifornia. Government reaps what is sows.

    Reply this comment
    • SkippingDog
      SkippingDog 9 February, 2015, 12:01

      Nonsense, Michael. John Seiler regularly lauds the state of Texas and applauds those who move to that godforsaken place.

      Reply this comment
  6. Dyspeptic
    Dyspeptic 9 February, 2015, 12:00

    Man, the headline for this article scared the holy mookie out of me until I re-read it. I thought at first Chris was talking about Farmer Boys restaurants.

    My knees went wobbly and my head started spinning at the prospect of not being able to get hold of a juicy, fat Avocado Bacon Cheeseburger, or their awesome Fish and Chips Platter.

    Farmer Bros. on the other hand, I could care less about. Frankly, their coffee is fit for prison inmates and people who think Wolfgang Puck frozen dinners are gourmet food.

    Reply this comment
  7. Ulysses Uhaul
    Ulysses Uhaul 9 February, 2015, 21:57

    Dysentri

    Your diet affects your vile posts. Farmer Brothers French Roast is quite good. Retract and Repent!

    Reply this comment
  8. NorCal Libertarian
    NorCal Libertarian 10 February, 2015, 18:54

    Well I’ve been holding off….expecting SOMEONE would say, er, write it, but no one has so I will…..
    Hey Brownie, ANOTHER 350 folks out of work….
    This is grounds for complaint!!!

    Reply this comment
  9. Michael
    Michael 11 February, 2015, 11:54

    This article is by Chris Reed. Don’t hate the messenger, hate the game.

    Reply this comment
  10. Hawghauler
    Hawghauler 4 March, 2015, 16:28

    Farmer Brothers has a huge carbon footprint. Energy for roasting coffee has to come from someplace. Cap and Trade will cost a bundle.
    So you move to another state. There is a reason why no other state did Cap and Trade… they knew it would ruin their economy. Nobody seems to be talking about cap and trade.

    Reply this comment

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Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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