BORDEN-CARLETON, P.E.I. - McCain Foods is blaming a shift in the market for French fries and the stronger Canadian dollar for its decision to close a plant in Prince Edward Island.
When the plant in Borden-Carleton shuts down at the end of October, 121 jobs will be lost.
The company said Thursday there has been a shift in demand for its French fries from North America to other parts of the world, which was a factor in its decision.
The New Brunswick-based food company says production at its plant in P.E.I. has dropped by two-thirds over the last decade and it's now the smallest and least utilized factory in McCain's network of facilities across North America.
McCain says it is offering early retirement benefits and severance packages that exceed those required by the law to its employees.
Frank van Schaayk, president of McCain Foods in the Americas, says the company will contribute $2 million and work with the provincial government to help develop initiatives that create sustainable jobs for its affected workers.
"Closing a plant is one of the toughest decisions we ever face," he said in a news release. "We deeply regret the personal impact the closure will have on our P.E.I. employees."
The group that represents Island potato farmers said the closure is a major blow to growers.
"We were shocked and disappointed by the news from McCain earlier today," said P.E.I. Potato Board Chairman Gary Linkletter in a news release.
He said farmers had hoped that as French fry demand increased globally that McCain would use excess processing capacity in Borden to supply the expanding demand.
"Instead, we're now dealing with the loss of the plant," said Linkletter.
The group says that McCain contracted with 23 Island family farms for delivery of over $7 million worth of potatoes to the Borden-Carleton plant this year.
Linkletter said the farmers will now have to explore other options, including delivering potatoes to McCain facilities in New Brunswick for processing in 2015 and beyond.
The Opposition Progressive Conservatives said the provincial government needs to develop a contingency plan to help soften the blow for the province's economy.
"The potato industry is the largest economic driver our province has â€” no Islander can afford this loss," said Tory Leader Steven Myers.
He said the province's Liberal government must "go into overdrive and make sure a replacement company is found that will continue to support the industry."
Premier Robert Ghiz acknowledged the importance of the potato industry to the provincial economy in a statement, promising more details in the coming weeks and months on how the transition funding from the company will be used.
"We fully recognize the importance and significance of the potato industry on the Island and look forward to discussing the success of its future with industry leaders."