W

ith beer now absent from minimarkets'€™ shelves following a government restriction, Indonesia'€™s largest brewer Multi Bintang Indonesia saw its first-quarter net profits drop by more than 40 percent, with an analyst suggesting that the firm'€™s only hope of salvation is to diversify to non-alcoholic beverages.

According to its latest financial report published on Thursday, Multi Bintang saw its bottom line slip by 41.72 percent year-on-year to Rp 107.33 billion (US$8.18 million) between January and March, compared with Rp 184.18 billion in the same period last year.

The plunging net profit, the company said in a press statement, was triggered by a stock reduction in the market in response to a restriction on the sale of alcoholic beverages in convenience stores introduced earlier this year.

The stock reduction in turn led the company to register a 22.91 percent decline in its first-quarter sales to Rp 568.99 billion from the Rp 738.12 billion it generated in the first three months of last year.

'€œOur income in the first quarter declined as a result of destocking carried out by the market ahead of Trade Minister Regulation No. 06/2015, which bans minimarkets and other retailers from selling or distributing beverages containing less than 5 percent alcohol, including beer,'€ the company said.

'€œThe ban has also led to other unwanted consequences, including business uncertainty for traditional wholesalers, which deeply impacted sales volume in the quarter. Traditional wholesalers are an important distribution point as they supply beer to local mid- and small-scale hotels, restaurants and cafés.'€

Under the trade ministry regulation issued early this year, beverages with alcohol content ranging from 1 to 5 percent can only be sold in supermarkets and hypermarkets. Previously, minimarkets and convenience stores were authorized to stock light alcoholic drinks.

The regulation '€” which is designed to curb underage drinking '€” came into effect early last month, but a number of convenience stores had begun to withdraw their alcohol stock weeks before the ban was fully effective.

Kiswoyo Adi Joe from Investa Saran Mandiri said he expected that plunging sales and profits would continue along the year as more than half of beer sales were made in convenience stores, adding that the company might experience steeper decline in the second quarter, as the regulation was now in effect.

The only solution viable for the company, Kiswoyo said, was to diversify into non-alcoholic beverages.

'€œThe company has to start boosting its non-alcohol production. Even exports might not be able to help the company, as most countries already have their own local beer preference,'€ he said.

Multi Bintang '€” which produces beer brands Bintang and Heineken '€” also produces non-alcoholic options such as Bintang Zero and Green Sands.

Multi Bintang opened a Rp 200 billion factory in Sampang Agung, Mojokerto regency, East Java, last year. The factory was designed to produce 50 million liters of carbonated soft drinks each year

The company, however, decided to postpone the expansion of a Rp 635 billion alcoholic beverage plant following the trade minister regulation.

Multi Bintang said that the company and Indonesian Malt Beverage Producers Association (GIMMI) were currently in talks with the Trade Ministry to find '€œbetter solutions for the big gap in its distribution chain for legal-age consumers and to prevent underage consumption'€.