December 20, 2024
SINGAPORE – Beverage giant Yeo Hiap Seng (Yeo’s) will lay off 25 of its employees directly involved in the manufacturing operations of Swedish oat milk producer Oatly.
The Straits Times understands that these 25 employees are in addition to the 34 Oatly employees affected by the closure of the Oatly plant here, bringing the total to 59.
The remaining 16 of the 41 Yeo’s employees in the Oatly plant have been redeployed to other roles within Yeo’s, the company said in a statement accompanying a bourse filing on Dec 19.
Meanwhile, the 25 affected staff will receive severance packages based on their salary and years of service, it added.
Yeo’s said its affected employees were hired specifically to support Oatly’s production at Yeo’s Senoko plant, and the layoff is a direct result of Oatly’s evaluation of its supply network.
The Swedish producer had announced on Dec 18 its plans to close its Singapore facility in a bid to improve the company’s future cost structure and reduce future capital expenditure needs.
US-listed Oatly’s share price slid 5.46 per cent following the news, while the mainboard-listed Yeo’s counter ended flat in Singapore on Dec 19.
Yeo’s noted that it has partnered Oatly in Singapore since 2019.
“While manufacturing operations will cease, the group remains committed to supporting Oatly’s distribution in Singapore and Malaysia,” Yeo’s said.
ST asked Oatly whether prices for its products here would be affected by the move, but the company would only refer to its Dec 18 announcement.
Yeo’s added that it informed the Food, Drinks and Allied Workers Union (FDAWU) upon the announcement by Oatly on Dec 18.
Yeo’s said it has been working with the union throughout this process to ensure adherence to tripartite guidelines, and that fair compensation is provided to affected employees in line with the company and union’s collective agreement.
The FDAWU and Yeo’s will also work with the National Trades Union Congress’ Employment and Employability Institute (e2i) to extend job matching support and career guidance to these employees.
Yeo’s chief executive Ong Yuh Hwang expressed regret at having to make the decision.
“Our priority is to support our colleagues and to reduce stress and anxiety for them during this period.
“To this end, we will work closely with the union to ensure affected employees receive all the necessary resources during this challenging time.”
The announcement by Yeo’s comes after an Oatly spokesman confirmed that 34 of its staff here will be laid off through a phased approach over the coming months.
The spokesman said: “We are committed to supporting all impacted employees and ensuring they are treated with respect and care in line with the company’s values. This includes offering outplacement assistance and training.”
In the bourse filing, Yeo’s chief financial officer Lai Kah Shen said both parties have consequently entered into an exit agreement to dissolve their tie-up to produce Oatly beverages in Singapore.
The local Oatly facility, which operates under a co-packing agreement with Yeo’s, will cease producing Oatly drink products by the end of 2024, Mr Lai said.
Yeo’s will also receive compensation from Oatly amounting to $32 million in instalments, to be paid in full by January 2027.
The compensation comprises an asset buyout, compensation for order obligations, repayment of loans and future lease payments.
However, Mr Lai stressed that Yeo’s balance sheet remains strong and that it would continue to pursue inorganic and organic growth opportunities.
Responding to ST queries, Yeo’s said the decision to close the plant was taken unilaterally by Oatly, aligning with its asset-light supply chain strategy.
It added: “We made the decision not to take over the facility or continue production at the site because our strategic focus is on our core business of ready-to-drink Asian drinks, soya milk, tea and hydration products.
“We do not see expanding into oat milk production as part of our long-term business direction.”
Yeo’s also said the machinery related to the Oatly co-packing agreement will be transferred to Oatly.
The Senoko facility will stop oat milk production for Oatly, though Yeo’s Senoko compound will continue to serve as a distribution centre for Singapore and exports.
FDAWU president Julie Cheong said in a Dec 19 statement that the affected Yeo’s workers, who worked at Yeo’s manufacturing plant in Senoko, were supporting the production of goods for Oatly, which is not unionised.
“Yeo’s has maintained a strong labour-management relationship with FDAWU for 18 years,” she said.
She added that Yeo’s has assured FDAWU that all alternative options have been explored, resulting in the redeployment of the 16 workers to other suitable positions.
“For the other impacted workers, FDAWU engaged in negotiations with Yeo’s to secure fair compensation packages for the affected workers, in line with unionised norms under the collective agreement.”
She added that FDAWU will support affected union members and workers at Yeo’s by tapping the wider labour movement network, including e2i, to provide job matching and career advisory services.
“NTUC and FDAWU also appeal to companies that while retrenchments may be inevitable, it should only be used as a last resort. Companies must exhaust all other options before making the call to retrench workers.
“Companies should be considerate about the timing of such exercises and avoid carrying out such exercises during festive periods, as far as possible,” Ms Cheong said.
A man and a woman wearing T-shirts bearing Oatly’s logo were seen solemnly leaving the Yeo’s compound in Senoko Way at around 11.10am on Dec 19, but declined comment when approached.
About 10 minutes earlier, a man left the premises with a white envelope in hand, also declining comment.
Staff wearing e2i and NTUC polo shirts were also seen leaving the place soon after noon.
The Oatly closure may signal wider shifts in the market for plant-based milk.
According to the 2023 report on the plant-based industry by the Good Food Institute (GFI), plant-based milk remains the largest category, with nearly 15 per cent market share of total milk dollar sales in 2023.
The think-tank estimates sales in the Asia-Pacific to be more than double that in second-placed North America.
Ms Mirte Gosker, managing director of GFI’s Singapore-based Asia-Pacific affiliate, said the field has become increasingly competitive and has also seen the entry of several Asia-based companies like Oatside.
Commenting on the closure of the Oatly facility, Ms Gosker said: “Oatly’s facility closure is also indicative of a broader realignment within the regional alternative protein industry.
“As the plant-based food and beverage sector continues to scale up and reach new markets, Singapore has leaned more deeply into its role as a global epicentre for cutting-edge research and development and regulatory leadership, rather than product manufacturing.”
- Additional reporting by Chin Hui Shan