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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