Amy’s Kitchen, jolted by array of economic woes, will close San Jose site

SAN JOSE — Amy’s Kitchen, jolted by an array of economic shockwaves, will close its San Jose production center for frozen pizzas, a shutdown that will wipe out hundreds of jobs, the company disclosed Monday.

An estimated 300 jobs will be lost when the San Jose factory closes in September although the plant is slated to cease pizza production within days. Founded in 1987, Petaluma-based Amy’s Kitchen is a successful producer of organic and healthy frozen foods.

“It’s very sad to have to do this, it’s brutal,” said Fred Scarpulla, acting chief operating officer with Amy’s Kitchen. “This is very emotional. I was very invested in the San Jose plant and I really wanted it to succeed.” Scarpulla also is the company’s chief culinary officer.

Inflation, skyrocketing materials costs, labor shortages and disruptions in the worldwide supply chain coalesced to doom the plant after slightly more than a year of operations. Located at 1885 Las Plumas Ave. in San Jose, the Amy’s Kitchen plant began production in March 2021.

“We really appreciate the healthy and good-tasting foods that Amy’s Kitchen produces and we are happy to have them here,” said Nanci Klein, San Jose’s director of economic development. “We are sorry to see them go.”

The main problems, in Klein’s view, were macroeconomic issues that have erupted nationwide, and Scarpulla’s comments appeared to confirm that.

“With the inflation that’s going on, we had a huge increase in costs,” Scarpulla said. “We had supply chain disruptions, we experienced a lot of staff turnover and labor shortages. A lot of things disrupted production and created startup problems.”

Brutal bouts of inflation alone forced expenses at the plant to jump by 20%, Scarpulla estimated.

Capital expenses, primarily fast-rising costs for building materials and equipment, were double what the company originally anticipated it would pay at the factory.

Logistics costs, mainly fuel, soared by 74%, the company estimated. Wheat prices, part of the collateral damage arising from Russia’s invasion of Ukraine that wiped out much of the production of the staple grain in the European country, skyrocketed by 60%. Vegetable oil prices surged by 90%.

For the last six to eight months, the San Jose production center has been losing about $1 million a month, he estimated.

“It really became obvious as sales results came in that continuing in San Jose wouldn’t be possible,” Scarpulla said.

Unite Here Local 19, a Bay Area union, has filed two unfair labor practices against Amy’s Kitchen, including a complaint on June 1 linked to the San Jose production center, according to the National Labor Relations Board website, and another on July 11 regarding the company’s Santa Rosa production center.

Unite Here has been attempting to unionize workers at the San Jose production center and the International Brotherhood of Teamsters Union has been attempting to organize workers in Santa Rosa.

“Amy’s Kitchen workers in Santa Rosa have joined forces with the Teamsters in calling for safer working conditions, better health coverage and a living wage on the job,” according to an online petition in connection with a labor-linked day of action that occurred on June 25. The NLRB filing in connection with the San Jose plant claimed that “coercive actions” occurred at the production center.

Initially, Amy’s Kitchen had bet that San Jose could account for 10% of the company’s production. But the persistent hiccups in the startup process there meant the production center couldn’t land crucial long-term contracts to supply supermarkets, grocery stores and other retailers with the San Jose plant’s chief product, frozen pizzas. Ultimately, the San Jose plant only managed to scale up to 5% of the companywide production capacity.

“We ordered a crucial piece of equipment in 2021 that we really needed for production and it just showed up this week,” Scarpulla said.

In what appeared to be a final blow, demand began to fade for the more expensive frozen pizzas that Amy’s offered for $10, $11, or $12 a package. Demand cooled for the San Jose plant’s primary pizza product as the economic impacts of the coronavirus began to ease — and inflation squeezed consumers.

Demand remains robust for the Amy’s Kitchen single-serve frozen foods such as enchiladas, burritos, ravioli, and broccoli and cheese that are less costly and typically range in price from $7 to $9 each. It’s possible that with inflation now soaring, people have turned to relatively inexpensive offerings from Amy’s Kitchen and other food producers.

Amy’s Kitchen still produces frozen food at company plants in Santa Rosa; Medford, Oregon; and Pocatello, Idaho.