Overview

In a significant development for the beverage industry, Yeo Hiap Seng has confirmed that it will receive a hefty $32 million in exit compensation after the closure of Oatly’s factory in Singapore, which led to the layoffs of 59 employees.

Partnership Termination

This announcement, made on December 19, highlights the decision to terminate the partnership between Yeo Hiap Seng and Oatly, which had been active since 2019 under an Exit Agreement. While Yeo Hiap Seng will cease production of Oatly beverages in Singapore, it will continue to distribute Oatly products across Malaysia and Singapore, ensuring that the brand maintains its presence in the region.

Compensation Details

The financial compensation will be disbursed in installments and is expected to be completed by January 2027. In a statement, Yeo Hiap Seng reassured stakeholders that the closure of Oatly's facility will not significantly affect its net tangible assets per share, emphasizing that the company’s balance sheet remains robust despite these challenges.

Factory Closure Reasons

Oatly announced the closure of its Singapore facility on December 18, citing the move as a strategic decision to streamline its future cost structure and minimize required capital expenditures. The factory, which had opened in October 2021 after a $30 million investment from Oatly, initially only expected to affect 34 employees upon closure. However, upon further evaluation, Yeo Hiap Seng disclosed that an additional 25 employees would be laid off.

Support for Affected Employees

In response to the layoffs, Yeo Hiap Seng has committed to providing severance packages reflective of the affected employees’ salaries and tenures. Furthermore, the company has engaged with the Food and Beverage and Allied Industry Workers’ Union to ensure compliance with Singapore’s tripartite guidelines during this transition. To aid the dismissed workers, Yeo Hiap Seng is collaborating with the National Trades Union Congress’ Employment and Employability Institute, offering essential support services such as job matching and career guidance.

Industry Implications

This closure marks a critical moment in the evolving landscape of the beverage market in Singapore, prompting discussions about sustainable practices and the operational strategies of multinational companies. As the industry faces increasing pressures from both economic factors and evolving consumer preferences, the outcome of Oatly's strategic shift will be closely monitored by stakeholders and competitors alike.

Conclusion

Stay tuned for more updates on how this situation unfolds and its effects on the broader beverages industry!