Interbrew consolidation costs 400 jobs

It was inevitable after such a rapid programme of expansion. Interbrew, the Belgian brewing giant which has been steadily growing its business over the last few years, has announced plans to cut costs by consolidating its western European business, a move which will affect the jobs of 400 or so employees in the Netherlands and the UK.

Interbrew said the decision to consolidate the businesses had been taken as a result of a review of current operations which revealed that the company was not making the optimal use of its production capacity.

As a result, the company's Dutch brewery in Breda is to be closed and production transferred to other facilities, while the company's Manchester brewery, home of the Boddington's beer brand, will see a significant reduction in capacity.

With a total of 17 breweries throughout western Europe, Interbrew's management was concerned that it was not making the best use of its capacity, and therefore instigated the review of operations to discover how best to optimise production capacity and to improve the overall cost structure. The review took into account brand requirements and volume relocation possibilities within the network and was designed to ensure the company's long term growth by efficiently integrating the company's existing and acquired business.

Interbrew has become a major player in the UK market following the acquisition of the Whitbread business and part of the Bass Brewers empire, and it was clear that capacity would have to be reduced to ensure profitable production. The company said that 1 million hectolitres of beer production would therefore be transferred from Manchester to other Interbrew brewing plants in the UK (at Magor in Wales and Preston). The Lancashire brewery's sole focus will now be on traditional high-quality cask ale production and packaging. This transition will result in a loss of approximately 68 jobs.

In the Netherlands, the Breda brewery's output and its associated logistic activities will be phased out over the next year and a half as production is transferred to other breweries within the Interbrew network. The entire 2 million hectolitre output of the brewery will be transferred to another Dutch brewery in Dommelen and to two Belgian breweries in Leuven and Jupille. As a result of the change, the total workforce at Interbrew's Dutch operations will be reduced by around 335, although 48 employees at Breda will be offered position elsewhere in the Netherlands.

While the closure of the Dutch plant and the transfer of production in the UK will payy off in the long term, the short-term costs entailed are significant. As well as the social costs - redundancy payments for the most part - the company will take a €25 million charge in the 2002 financial year relating to asset write downs, while the transfer of production to other breweries will also entail increased investment of around €12 million, spread over a three-year period.