SINGAPORE – In a significant workforce reduction, beverage giant Yeo Hiap Seng has announced that 25 of its 41 employees directly involved with the operations of Swedish oat milk producer Oatly will be laid off.

This decision comes in light of Oatly's recent declaration to close its Singapore facility, bringing the total number of affected employees to 59, including 34 Oatly staff.

In a statement released on December 19, Yeo Hiap Seng explained that they have done their utmost to reassign impacted workers, successfully placing 16 employees in different roles within the company. Those who will be laid off can expect severance packages calculated based on their salaries and years of service, providing some financial relief amid uncertainty.

The layoffs stem from Oatly's internal assessments aimed at restructuring its supply network and improving future cost efficiencies.

Oatly announced its intention to close the facility in Singapore on December 18, which has been crucial since it partnered with Yeo since 2019.

Following the unsettling news, Oatly's shares tumbled by 5.46 percent in the United States, while Yeo's stock dipped by 0.86 percent on the Singapore Exchange, reflecting the market's reaction to the layoffs.

Despite halting manufacturing operations, Yeo Hiap Seng has reiterated its commitment to supporting Oatly’s distribution across Singapore and Malaysia.

This indicates that they will continue to collaborate with the brand in those markets.

The Food, Drinks and Allied Workers Union (FDAWU) was promptly informed of these layoffs, and Yeo's management has been working closely with the union to guarantee compliance with tripartite guidelines to ensure fair compensation for affected employees.

Yeo's CEO, Ong Yuh Hwang, expressed regret over the layoffs.

"Our priority is to support our colleagues and alleviate their stress and anxiety during this challenging time," she stated. The company aims to provide necessary resources and assistance to those affected.

Additionally, the Oatly spokesman mentioned that the impact on its staff will occur in phases over the coming months, emphasizing their commitment to treating all affected employees with care and respect.

In a move to conclude their operational ties, Yeo Hiap Seng and Oatly have entered into an exit agreement.

This officially ends their co-packing relationship. The local facility is set to stop production of Oatly products by the end of 2024.

The exit agreement entails Yeo Hiap Seng receiving $32 million in compensation by January 2027, which includes asset buyouts, repayment of loans, and future lease payments.

Despite the challenges posed by this transition, Yeo Hiap Seng's chief financial officer, Lai Kah Shen, highlighted that the company’s financial health remains robust.

He stated that the company will continue exploring both inorganic and organic growth avenues.

As Oatly restructures, the fallout from its decision underscores the volatile nature of the beverage industry in this region.

Stay tuned for further updates as the situation develops!