The coronavirus lockdown and government’s ban on the sale of alcohol has cost South Africa R6 billion in planned investment from the world’s second-largest beer brewer, Heineken.
The company said that due to tough micro and macro-environment challenges, and with the additional strain brought on by the lockdown it is has had to reassess a number of their expansion ambitions. This includes shelving plans to build a new brewery on the KwaZulu-Natal north coast that was expected to create more than 400 permanent, direct and indirect jobs.
A release this morning of the company’s half-year results showed that the beer giant’s operating profit declined by 52.5%. South Africa and three other counties led the decline.
Chairman of the executive board and CEO, Dolf van den Brink, cited in his report:
“In South Africa, total volume declined in the forties, due to a ban on the sale, distribution and production of alcohol from late March to end of May. After sales resumed in June, a new ban on alcohol sales was implemented mid-July.”
In a press release, Heineken SA states that despite the incredibly tough challenges it is facing, they remain committed to long-term investment in SA.
The beer brand says its local production has been hampered and has resulted in ongoing efforts by the business to implement cost-cutting measures. This includes but is not limited to salary cuts. According to the press release the company is “desperately trying to protect the jobs of more than 900 employees”.
With no end date in sight for the ban on alcohol sales, the beer company has cut executive salaries by 20% from May to December and no bonuses will be paid.
The company’s portfolio includes brands like Heineken, Amstel, Windhoek, Sol, Miller Genuine Draft, Strongbow Cider, Soweto Gold and Tafel.
The beer production facility worth R6 billion was ear-marked for the Inyaninga site near Dube TradePort and was set to provide a massive boost for the region. In 2019 Heineken SA announced its plans to expand its geographic footprint to KZN.
“Our bottom-line was disproportionately impacted due to the decline in the European on-trade, as well as temporary government restrictions on our activities in Mexico and South Africa. We have taken mitigating actions and will further intensify our focus on costs,” Van den Brink said in his report comments.
Heineken reports that countless businesses that rely on them have had to close their doors or scale down their operations. This as result of government’s recent sudden decision to stop the sale of alcohol.
Heineken said it is in one accord with many industry voices calling for the immediate recommencement of alcohol trade.
“We are willing to work with government on specific issues that negatively affect our society. The industry demonstrated its commitment in the initial resumption of trade, by delivering numerous solutions to ensure safe and responsible trading throughout our value chain. We urge the government to prioritise both lives and livelihoods at this time,” the beer brand states its press release.
- Edited to include official statement by Heineken SA.