Diageo brews up sobering plan

Analysis: The announcement by Guinness’s parent company Diageo that it is to sell half the land at its iconic St James’s Gate site in Dublin and close its breweries in Kilkenny and Dundalk with the loss of 250 jobs will undoubtedly leave a long and bitter aftertaste, writes Laura Slattery .

But this sobering outcome of Diageo’s long-awaited review of its brewing operations in Ireland could have been even more grim.

The global drinks giant had been predicted to completely shut down production of the black stuff at St James’s Gate and brew only the flavour extract known as “the essence of Guinness” at the site.

St James’s Gate could have become little more than a tourist attraction - albeit one that draws in 900,000 Guinness-loving visitors every year.

Instead, St James’s Gate will remain a fully functioning brewery, with a remodelled and upgraded brewhouse on the north side of Thomas Street.

Capacity will be cut by a third as some production shifts to Diageo’s planned new brewery at a site close to the Irish capital, but the landmark St James’s Gate site will remain the single largest production site of Guinness.

Every single pint of Guinness consumed in Ireland will continue to be brewed at St James’s Gate, where Arthur Guinness first started producing the beer in 1759.

The site for the new brewery, which is rumoured to be in Clondalkin in west Dublin, has not yet been announced. When production starts in 2013, it will brew Harp, Smithwicks, Budweiser and Carlsberg as well as Guinness, which it will export to the stout’s fast-growing international markets.

Sales of Guinness are growing the fastest in Africa, where the Irishness of the drink is played down and the authenticity of the brand is not important to consumers.

But Diageo’s consumer research shows that drinkers in the Irish, British and North American markets do care where their Guinness comes from.

Their feelings have undoubtedly played a part in drinks group’s decision not to abandon the traffic-congested site on the banks of the River Liffey.

Diageo chief executive Paul Walsh was keen to accentuate the positive at the drinks firm’s press conference at the Guinness Storehouse today, stressing its plan to invest €650 million in its Irish brewing operations.

Mr Walsh, who is from Manchester, admitted that every time he visits the brewery he is reminded of “the amazing historical legacy of St James’s Gate”.

Diageo is not ready to sever these historical ties just yet.