By Sara Schonhardt
JAKARTA, Indonesia--The head of one of Indonesia's biggest beer
producers says that a prohibition on the sale of alcohol at
minimarts and small retailers raises concerns about legal
uncertainty and could derail millions in allocated investments.
Over the last three years, PT Multi Bintang Indonesia Tbk has
poured $64.4 million into upgrading facilities and has allocated
investment worth EUR40 million ($43 million) for the coming three
years.
"We want certainty of law. We want to know that the investments
we have put into the country will continue in the foreseeable
future," said Multi Bintang President-Director Michael Chin.
The decree from the Ministry of Trade is the latest among dozens
of regulations that makers and sellers of alcoholic drinks in the
world's largest Muslim-majority country must comply with. It
prevents convenience stores from selling beverages with an alcohol
content of more than 1%, targeting beer because wine and spirits
aren't sold in such stores. Sales will still be allowed in
supermarkets and restaurants. The restrictions could affect about
60% of distribution in the country.
Multi Bintang, which is majority owned by Heineken and has been
in Indonesia since 1929, also produces Heineken in Indonesia and
Guinness through a third-party agreement.
Indonesia accounts for less than 10% of Heineken's global
revenue, said Mr. Chin. But Multi Bintang has seen strong growth in
recent years with urbanization and tourism, and a young,
increasingly affluent population spurring growth of the beer
industry, he said.
Mr. Chin said the company was also seeing rising demand for
exports from countries such as Japan, South Korea and some parts of
the U.S. and Europe. That would mark a new growth area, since sales
have predominantly been domestic.
Producers say the ban took them by surprise when it was first
announced in January and they are already seeing the impact. The
industry has seen a drop of 700 billion rupiah ($53.9 million) in
sales in the first quarter as many retailers stopped purchasing to
phase out stocks, Mr. Chin said.
Over the past three years, Multi Bintang has invested $41.9
million in upgrading its factory in Tangerang, outside Jakarta,
with state-of-the-art equipment. It invested another $17.7 million
in building a third, alcohol-free beverage plant to produce its
Bintang Zero and Green Sands labels, near its second beer factory
in Surabaya.
Non-beer products account for around 10% of the company's
production, said Mr. Chin, but it has long been planning to
diversify to take advantage of opportunities in the non-alcohol
drinks category. Multi Bintang is also working on product
innovation, launching Bintang Radler--beer with a shot of lemon
juice--last August.
The company has allocated another EUR40 million toward expanding
its production capacity further over the next three years. But,
said Mr. Chin, "we'll have to see over the next few months what are
the certainty of law and regulation before we can press the button
on that."
Last week, Islamic parties in Parliament proposed a draft bill
that seeks to impose a total ban on the production, sale and
consumption of alcohol. Several secular lawmakers and high-level
ministers have dismissed the proposal as unlikely to become law,
but Mr. Chin says the industry is keeping an eye on it.
For him, the proposed bill goes beyond beer. "It's about public
policy," Mr. Chin said. "In a country like Indonesia, that would
impact foreign investors as well as tourism."
The Ministry of Trade says the minimarket ban is needed to
prevent youths under the legal drinking age of 21 from accessing
alcohol. Mr. Chin said the company met officials on Sunday and
discussed ways they can work together to curb underage
drinking.
"We feel there are many ways to address this issue and we feel
that having a ban is not the most effective solution," he said.
Multi Bintang says solutions could include training retail staff
to ask for identification, or by putting restrictions on selling
hours. There has also been talk in the local media about creating
specialized shops for beer, he said.
"We remain optimistic that we can find a solution with the
government that allows accessibility of our products to consumers
but at the same time deals with underage consumption," said Mr.
Chin.
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