Spain: Freixenet’s Plan to Lay Off 80% of Workforce Faces Catalan Government Opposition

The world’s leading cava brand Freixenet, majority owned by German wine maker Henkell & Co. (Dr. August Oetker KG), faces opposition from the Catalan government for its plan to temporary layoff as many as 615 of the 778 people it employs in Catalonia beginning in May.

“The furlough, caused by force majeure, is an exceptional measure that has been taken in the current context of a crisis that had been brought about by a lack of raw materials because of the harsh drought that has affected the sector since 2021 – and which hit the El Penedès area particularly hard in 2023,” the company said last week.

However, following the Catalan government's declaration that it cannot accept force majeure as a reason for short-time work at Freixenet S.A. and Segura Viudas S.A.U., Grupo Freixenet announced today that it will continue constructive negotiations on short-time work with the works council and trade unions.

“The rationale for the original application for short-time work from April 22, 2024, remains unchanged,” the company said in a statement today.  “The immense shortage of grapes and base wine for Cava production is leading to massive reductions in work processes. This is a consequence of the extreme drought in the regions of Alt Penedès, Baix Penedès, El Garraf, and Camp de Tarragona, which was once again confirmed in the standard rainfall index of the Meteorological Service of Catalonia (METEOCAT) on March 31, 2024, and has increasingly affected the sector since 2021.

“Since then, Freixenet, along with other Cava producers, unions, and grape producers, has urged the D.O. to adjust the regulation for Cava production and take measures to counteract the strained supply situation. While the D.O. recently agreed to approve extraordinary measures for the next harvest, this was neither sufficient nor timely to avoid a short-time work application,” the company added.

“Although the drought has already caused a deficit of 80 million bottles in the Cava sector, Freixenet is determined to meet consumer demand in the short and medium term,“ the statement ends.

In Catalonia, which is now in its fourth successive year of drought, the regional government has declared a state of emergency and introduced a series of limits on water consumption that will affect 6 million people. The restrictions – which were triggered after reserves fell below 16% – include a limit of 200 liters per inhabitant per day, an end to beach showers, and a ban on public or private events that use water suitable for human consumption, such as temporary ice rinks, foam parties or water games.

The effects of the climate emergency have become increasingly apparent across Spain over recent years, bringing deadly wildfires, affecting the production of traditional items such as olive oil and wine, and leading to the drying up of over-exploited wetlands in the south.

According to data from the environment ministry, agriculture accounts for nearly four-fifths of water consumption in Spain (79%), while residential usage accounts for 15%, industry for 5.8%, and leisure for 0.4%.

In May last year, the Spanish government approved an unprecedented EUR 2.2bn plan to help farmers and consumers cope with the enduring drought. Among its provisions were EUR 1.4bn of funds from the environment ministry to tackle the drought and increase the availability of water, and EUR 784m from the agriculture ministry to help farmers maintain production and avoid food shortages.

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