E-Malt.com News article: Ireland: It’s time for Guinness to return into the pub environment – Diageo Ireland CEO

John Kennedy, chief executive of Diageo Ireland, believes there is a huge responsibility in taking over the running of the Guinness brand in its 250th year in its home country and re-invigorating its name in the pub is top of his agenda, thepost.ie communicated on May, 3.

According to Kennedy, Guinness has always had strong connotations of being a pub or “on-trade” drink. “It is part of its heritage and image.” He said that, despite radical changes in drinking habits - which have seen more Irish people turn to the off trade - he believes Guinness fits comfortably into the pub environment.

Diageo has responded to the change in drinking patterns by making it more appealing as a stay at home drink. In fact, just as the off-trade alcohol market has been growing, Guinness has been lifting its off-trade market share.

Kennedy believes it is time to emphasise the consumption of Guinness in the pub again as a big part of the brand’s heritage and future.

“Guinness is now a pillar of strength in turbulent times,” he said, pointing to the fact that four out of every ten pints on a tray in an Irish pub were still Guinness. In Britain, it has become the biggest selling draught beer in the greater London area.

Kennedy said the drift from the pub to home drinking was beginning to slow, and some rebalancing would take place in the Irish market in terms of the on-trade/off-trade mix. Based on what has happened in other markets, he sees signs of a drift back to the pub, and wants Guinness to be at the forefront of that change.

He goes as far as saying that he believes the years ahead “could be a golden age for Guinness”. They are lofty aspirations indeed, but Kennedy can point to a resurgence of the brand in recent years to back up his ambition.

“About 12 years ago, there was a view that we would just keep on losing market share for years,” he said. But that hasn’t happened. The decline in Guinness sales and its loss of market share has been stopped and, to some extent, reversed.

Kennedy believes this is due to several factors, including marketing and public relations around the brand. But he attributes most of that success to the quality of the beer.

Guinness spent a lot of time and effort on quality control issues. It went around every pub introducing new technology and training to ensure consistency in the quality of the beer. “There was this old idea that a pint was good in one place and not in another. We changed that,” he said.

But it is hardly all plain sailing. Diageo estimates alcohol consumption in Ireland will fall by 7 to 8 per cent this year. A recent nationwide survey that it carried out found that 15 per cent of households in the Republic had done some shopping north of the border in the last quarter of 2008 - that equates to about 300,000 households.

“There is no doubt that people are going out less and eating out less,” he said. He also acknowledged that the off-trade industry had done well from cheap drink promotions and loss leader sales, as people become more price sensitive. But he favours seeing the change as one from “conspicuous consumption” to “considered consumption”.

The slowdown has placed a major decision on Kennedy’s lap: what to do about the group’s brewing operations in Ireland. Last year, Diageo decided to press ahead with the closure of the Kilkenny and Dundalk breweries and opt for a modern new brewery near Leixlip. This would handle the brewing of all Diageo beers except Guinness, which would remain in the city, at St James’s Gate.

The move would have seen Guinness sell off half its 50-acre site along the river Liffey and build a new brewhouse on the other half of the site, specifically for Guinness.

The decision took more than a year to finalise. Now that structure is being reviewed in light of the slowdown, questions about the need for investment and a variety of other factors. Kennedy said deliberations on this review were ongoing and a decision would be made in the coming weeks. He said he could not comment any further in the meantime.

The slowdown is also affecting costs throughout the Diageo Group internationally, with group management looking to achieve cost savings of €100 million around the world. Kennedy refused to be drawn on exactly what this might mean for the Irish operations.

Despite the tougher trading environment, Kennedy believes strongly on focusing on the beer. For him, Guinness in particular is a powerful brand that requires nurturing and planning for the future.

“We have an obligation to leave the brand in a good position for the future, given its 250-year history,” he said.


06 May, 2009