Heineken cuts jobs in the Netherlands

Reuters, 5 September 2003: 9:48 AM EDT

World's fourth-largest brewer plans to cut nearly a tenth of its Dutch workforce, takes $76M charge. September 5, 2003: 9:48 AM EDT

AMSTERDAM (Reuters)—Heineken, the world's fourth-largest brewer, plans to cut nearly a tenth of its work force in the Netherlands as its home beer market continues to deteriorate, the company announced Friday.

The brewer will take a charge of about 70 million ($75.7 million) in its 2003 results to cover the costs of a wider reorganization of the unit that will involve 450 job cuts.

Heineken, which sells its flagship beer across the world under its well-known green label along with a variety of local brands, expects to recover the costs within three years.

The emphasis in all cases will be on improving efficiency and cutting costs, which will mean centralizing a number of support departments, the brewer said.

With demand going flat in many developed markets like the Netherlands, Heineken has been expanding its operations abroad, snapping up brewers that have a strong position in emerging markets such as Eastern Europe and South America.

Earlier this week, Heineken's smaller Dutch peer Grolsch reported a one percent decline in beer volumes on the domestic market in the first half.

It is a lot of jobs, about nine percent of the Dutch work force. But if you want to keep earnings at the certain level, you'll have to cut costs. It is a measure for a stagnated market, said Gerard Rijk, analyst at ING Financial Markets.

In June, Heineken warned of flat profits in the first half due to problems such as general economic slowdown and the effects of the SARS outbreak on tourism and leisure activities.

It is due to post first-half earnings next Wednesday.

Some analysts now speculate that troubles at its home unit might have also been among the reasons for the warning.

Shares of Heineken were down 1.3 percent to 34.26 in late afternoon trading, in line with the Dow Jones STOXX Food & Beverages index. They have gained nearly a fifth in market value since touching a four-year low of 28.74 in June.

Heineken has its roots in Amsterdam, where its founder Gerard Adriaan Heineken bought a brewery in 1864, but today it makes less than six percent of its beer in its home country.