For some time, analysts have questioned whether Diageo should sell Guinness to concentrate on spirits. Over the summer, the markets have been drunk on speculation of either a sale of the brand or that Diageo might merge with a brewer such as SABMiller, which could potentially be better positioned to expand the stout, which archives show was exported to the US in the 1820s, to Sierra Leone as early as 1828 and to New Zealand in 1858. A soldier’s diary shows that bottles of Guinness even made it to the Battle of Waterloo in Belgium in 1815.
As recently as last week, traders were still speculating on a merger between Diageo and SABMiller, potentially as a counter-move to avoid any likelihood of the latter being swallowed up Anheuser-Busch InBev.
But at the Guinness brewery in Dublin all the talk was about how Diageo is investing in the future of the “black stuff”. Enda Kenny, the Irish prime minister, and Ivan Menezes, Diageo’s chief executive, opened the fourth “brewhouse”, or brewery, at the St James’s Gate site. It is the first new brewery to open there since 1988. The first two are now defunct, their machinery relics, while the third is already outdated. The €169m (£135m) fourth brewhouse, commissioned at the height of the Irish economic depression, was the biggest construction site in the country in 2012, and Mr Kenny was keen to spell out the importance of Diageo in Ireland, where the drinks company, the world’s biggest, supports 20,000 jobs.
Mr Menezes, who replaced Diageo’s long-standing chief executive, Paul Walsh, in July 2013 stressed that Guinness and beer are key to the group.
“Strategically beer is core to Diageo, as is Guinness,” Menezes told The Sunday Telegraph. “If you look at our investment behind this business, not just today but in Africa in the last few years, it fully reflects our commitment to the beer business and to Guinness. Guinness is core to achieving Diageo’s performance ambition and our beer position in Africa is an incredible strategic asset.”
Despite being better known for its spirits, Diageo has been pouring hundreds of millions of pounds into new brewing assets over the last five years, particularly in Africa, the latest battle ground between the major drinks companies and where 65m more people will reach the legal drinking age by 2023.
Diageo believes the positions it has built up in beer in Africa through deals such as its $225m (£138m) acquisition of Ethiopian brewery Meta Abo in 2012, will also help it to expand its spirits business. Menezes hints Diageo is not necessarily done buying breweries either.
While Africa offers huge expansion opportunities for the Guinness brand and Diageo, Menezes insists he isn’t abandoning the home front. In Ireland, the company has been renewing efforts, putting “feet on the street” and sending out its sales representatives to twice the number of pubs and bars than it was contacting last year to ensure they stock Guinness and its other brands. The aim is to grow market share. And far from a threat, Menezes believes the craft beer trend will help the Irish stout.
“The interest in taste, quality and craft in the beer category is very good for us,” says Menezes. “If you look at the interest and where consumers are going, they want heritage, they want craftsmanship, they want quality and they want better beers from a taste standpoint.” Dublin Porter and West Indies Porter will be the first of many new variants, he adds.
Diageo is not the only major brewer trying to tap into the craft market. Others, such as SABMiller, have been trying to appeal to the new generation of discerning beer drinkers with moves such as importing fresh, tanked beer from the Czech Republic. In the US, though, their efforts haven’t always gone down well. Major brewers have been accused of being “crafty” by buying up micro-breweries or marketing mass-produced drinks as “artisan”.
Menezes insists craft doesn’t always have to mean small. “You need real credentials. If you pretend to be something you’re not, that is not going to work. Ultimately when you look at the quality of ingredients and the way we go about building, we have got the credentials.”
For O’Farrell, a “fourth generation” Guinness employee, it’s now back to business after the excitement of last week’s official opening. “When I just started the second brewhouse was still in operation,” he says. His great-grandfather worked at the original brewery. For families like the O’Farrells, owners of Guinness come and go, new variants are introduced and withdrawn, but at the heart of it all remains one thing: their dedication to brewing the black stuff (www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/11093581/Guinness-goes-back-to-the-future-with-new-beers-and-brewery.html).