Hershey seeking buyer for plant

As Hershey begins its first round of layoffs at its Oakdale plant Monday, it is trying to sell the soon-to-be-empty chocolate factory for $18.5 million.

Today is the last day for 99Oakdale employees who work on the Hershey's Kisses and Kisses With Almonds production lines.

Hershey is closing the plant in phases, with another production line scheduled to shut down in the fall. The chocolate factory, which employs 575 people, will close in January.

Employees reached this week by The Bee said they could not comment on the layoffs because they had to sign confidentiality agreements, under the threat of losing their severance packages.

The Oakdale plant closure is part of a restructuring plan by Hershey that will transfer some candy production to a new plant in Mexico. The candy company has closed five other plants in the United States and Canada this year, resulting in thousands of layoffs.

Hershey has contracted with CB Richard Ellis, a major commercial real estate firm based in Los Angeles, to sell the Oakdale plant.

A brief listing for the chocolate factory appears in the July brochure of CB Richard Ellis' Monthly Exclusive Listings, along with an aerial photograph of the buildings.

It lists the sale price at $18.5million, and says it includes the 417,000-square-foot main plant as well as a nut storage building, a tank, bean storage areas, a "Dudley" building and a temperature-controlled warehouse. The property sits on 85acres.

Representatives from CB Richard Ellis did not return phone calls.

Rich Murdoch, an Oakdale contractor and developer, said he has been working with the real estate firm to recruit businesses that might be interested in the site.

A water bottling company has visited and shown interest in the 130,000-square-foot warehouse adjacent to the main plant, Murdoch said.

That building houses Graham Packaging, which contracts with Hershey to make the plastic bottles used for Hershey chocolate syrup.

Graham has started to scale back its operations and will close its plant by the end of the year, company spokesman Donald Sarvey said.

Its 25 employees will be offered transfers to another Graham plant or severance packages, Sarvey said. More than 10 employees already have transferred to other plants.

It remains to be seen whether one employer will scoop up all of the Hershey buildings, or whether the land will be subdivided, Murdoch said.

"As a developer, there is a lot of value in the land that goes with that property," Murdoch said. "If you look at the square footage of the building, it is not much yield. You could build a whole industrial park out of that property."

Speculation about what type of company might move into the site is varied. A cheese maker, jelly bean factory, food processor and winery have been mentioned by industry insiders as possible buyers.

"It could be warehousing, distribution or it could be manufacturing. There are several uses," said Doug Sweetland, economic development director for the Stanislaus Economic Development and Workforce Alliance.

A clearer picture might emerge once Hershey removes its manufacturing equipment, and potential buyers can view the site, Sweetland said.

Hershey will remove its equipment in phases, although the company did not provide a timeline. The buildings will be vacant by February, according to the real estate listing.

The plant is somewhat dated, but it has been well-maintained by Hershey over the years, Sweetland said. Its sheer size — 615,000 square feet in buildings, plus dozens of acres of vacant land — could be one of its best selling points.

"There are very few of that size in the valley," Sweetland said.

Oakdale Public Works Director John Word said the Hershey plant has "very adequate" water supply and fire protection, which could help draw employers.

Hershey has two private wells that supply its groundwater, which is cheaper than pulling water from the city.

Modesto Irrigation District provides power to the chocolate factory, which Murdoch said has saved Hershey "millions" in power bills since Hershey switched from Pacific Gas and Electric in 1997.

The city is looking into making some changes to its wastewater policy for the Hershey plant, however. Today, the city takes 100 percent of Hershey's untreated wastewater, which includes solid milk.

Future employers might be asked to treat a percentage of their wastewater before it is discharged, Word said. The city expects to have a new waste-water policy in place by the time Hershey pulls out of Oakdale.

One of the biggest drawbacks to the plant might be its location, particularly for a business that relies heavily on truck transportation. Although the plant is served by a Union Pacific rail line, it's situated in a rural spot away from the Highway 99 corridor.

"The reason that Hershey is there is because it needed to be central to dairies," Murdoch said. "This area is surrounded by dairies and they have a nice facility to offload milk. For the right company, that would be a plus. A cheese plant would be perfect."

Regardless of which company takes over the vacated plant, one thing that will be watched closely is the number of jobs that come with it.

"Jobs is a big thing the city would like to see regenerated," Word said.

Hershey is Oakdale's largest employer. At its peak in the 1990s, it employed as many as 750 people.

Bee staff writer Christina Salerno can be reached at csalerno@modbee.com or 238-4574.