One of Indonesia’s biggest beer producers, PT Multi Bintang Indonesia, reported a plunge in profits of 42% in the first quarter of the year, when convenience stores started phasing out stock in preparation for a ban on alcohol sales.
Net income was down to $8.2 billion (107 billion rupiah) year-on-year in the first three months of the year, the company said in its latest financial report. It also said it was putting on hold planned investments of around 635 billion rupiah due to the ban and continued uncertainty over the future of the regulation.
The ban is part of decree from the Ministry of Trade that prevents convenience stores from selling beverages with an alcohol content of more than 1%. It took effect on April 16, but retailers were told to start phasing out stock in January.
While beer sales are still allowed in supermarkets and restaurants, beer distributors feared that sales would take a hit since small retailers and convenience shops account for around 60% of all beer sales in the country.
“These traditional wholesalers are an important distribution channel in the route-to-market for most consumer goods in Indonesia, including beer,” Multi Bintang said in a statement.
Retailers and analysts have also been critical of the ban, saying it was pushed too quickly without allowing the industry time to prepare.
“This is the ready-fire-aim policy making where nobody thinks through the implications,” said Paul Rowland, a Jakarta-based political analyst. “We’ve had a string of these kind of policy decisions that don’t take into account the end result,” he added, pointing to a proposed ban on second-hand clothing and the cancellation of thousands of import licenses in December.
Multi Bintang’s President Director Michael Chin said that the decline in profit and revenue, which fell by 23% from the same period last year, “was primarily due to the destocking.” The company is currently in talks with the Ministry of Trade about the ban but says they’re moving slowly.
In an interview last month, he told The Wall Street Journal that concerns about legal uncertainties raised by the decree would likely derail tens of millions of dollars allocated to boosting the company’s production. Muslim-majority Indonesia makes up a small percentage of total global beer sales for major beer makers, such as Heineken and Guinness, but its growing middle class has made the world’s fourth most populous country an enticing market for expansion.
Multi Bintang, which is majority-owned by Heineken Holding NV of the Netherlands, also produces Heineken in Indonesia and Guinness through a third-party agreement. It has been in Indonesia since 1929.