Guinness troubles dampen Diageo spirits

By Chris Mercer

- Last updated on GMT

Related tags: Guinness, Diageo

Sales of Guinness have slipped in the beer's Irish homeland over
the past year, its maker Diageo has announced, taking the shine off
a solid sales rise for the drinks firm.

Diageo sold eight per cent less Guinness in Ireland in the year up to 30 June, compared to the year before. Sales were also down three per cent in Britain.

The difficulties with Guinness blighted a nine per cent overall sales rise for Diageo, despite gains for the iconic dark beer in other countries, notably Russia, the US and Japan.

Guinness, which has been brewed in Ireland since 1759, has long held an almost mythical association with health and well-being. Stories range from the much-fabled Guinness diet, in which the consumer is able to live on Guinness alone for a set period, to adverts by the brewer, such as 'Guinness for Strength'.

However, the health qualities of Guinness have been out-gunned on the home front by concern over alcohol-related illness. World Health Organisation figures estimate that 600,000 Europeans die every year from alcohol-related problems and that this costs European Union member states €200bn annually.

The Irish drink more on average than anyone else in Europe, according to market research group Euromonitor​, which has led to fast-growing rates of alcohol-related illness in the country and the declaration of a national crisis.

Authorities have stepped up their campaign to tackle alcohol abuse, launching ads with the slogan 'Think before you Drink - less is more', as well as banning happy hour promotions in pubs and promising fines for any bar selling alcohol to someone already drunk.

Diageo is set to combat the problem with a reduced alcohol Guinness. It said Guinness Mid-Strength began trials in 80 outlets during the second half of its financial year. Results of the trial have not been released.

Even if this works, however, there are also pure business reasons why Guinness has suffered in Ireland.

Diageo said it had suffered after competitors increased their investment in Ireland's drinks sector. One of those competitors is Magners, which has enjoyed renewed success with its namesake cider brand this year.

Figures also show, according to Diageo, that more Irish people were drinking at home. The firm said this had caused it problems because the majority of Guinness is sold on draught in bars.

Fortunately for the group, Guinness continued to increase its popularity in several other countries over the last year. Volume sales rose seven and 14 per cent in the US and Japan respectively.

And, Diageo was able to further bury its concerns over Guinness with high single-digit and some double-digit sales rises for Smirnoff vodka across a number of markets. The Johnnie Walker brand also performed well.

The decline of the ready-to-drink (RTD) market in Europe and North America continued to affect the group, as shown by a drop in volume for RTD Smirnoff in these regions.

Related topics: Beer, Wine, Spirits, Cider, Diageo

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