Scottish & Newcastle faces more job cuts by Heineken

Published on Wednesday 26 August 2009 21:44

SCOTTISH & Newcastle employees are braced for further job losses after parent group Heineken, the Dutch brewing giant, said it was planning another round of cost cutting.

The world's third-largest brewer, which last year carved up Edinburgh-based S&N with Danish rival Carlsberg, has raised prices across its brands but said falling disposable income and higher unemployment around the world would keep pressure on beer volumes.

While the Amsterdam-based brewer said the takeover of S&N had helped fuel profits by 20 per cent to 870 million for the first half of the year, it admitted profits were driven by cost savings and price increases which helped offset a fall in beer sales.

It has stripped out 50m (43m) of costs in the first half through a combination of job losses, brewery closures and marketing cuts. In the UK it has axed 750 jobs, reducing its headcount to 4,000, and realising 57m worth of synergies from the S&N integration.

The trend echoes recent statements from rival brewers Carlsberg, Anheuser-Busch InBev and SABMiller, which are all seeing falling beer volumes.

Chairman and chief executive Jean-Franois van Boxmeer said the integration of S&N, which it acquired at the beginning of 2008, and other recently bought businesses was now complete and that the rate of decline in beer sales would ease towards the end of the year.

He said: "Our rigorous Total Cost Management programme is delivering early results, with annualised savings of 120m achieved. We see substantial opportunity to drive down our cost base in the second half of the year and beyond.

"The integration of Scottish & Newcastle and our other newly acquired businesses is now completed. There are clear signs that our specific plans to improve profitability in each of these businesses and to strengthen our long-term market position in the UK are bearing fruit."

Heineken, whose brands include Foster's, John Smith's and Kronenbourg 1664, has a 26 per cent share of the UK market, where beer sales fell 6.2 per cent in the first half. It has put up prices to restore margins and added Amstel and Tiger beers to its regular UK portfolio. It has also managed to grow its cider volume by almost 4 per cent on the strength of brands such as Strongbow, Bulmers Original and Bulmers Pear.

The volume of Heineken brand beer sold fell 4.7 per cent over the period, with strong growth in Africa and the Middle East partially offsetting declines in the Americas and Europe.

Heineken and Carlsberg bought S&N for 7.8 billion last April, carving up its operations in a move that called time on more than 250 years of history as an independent brewer.

Heineken took on the UK operation of S&N at breweries in Manchester, Reading in Berkshire, Dunston near Newcastle, and Tadcaster in North Yorkshire as well as the Bulmers cider mill in Hereford.

Heineken's turnover for the first half came in at 7.15bn, down 0.4 per cent, while organic net profit rose 12 per cent to 483m .