Business Plus

Pint Of Plain Moves To Premium Tipple


Diageo has mostly a spirits focus but the UK drinks giant hasn’t forgotten about its beer brand Guinness. In the year to June 2022, the beer category accounted for 16% of Diageo’s net sales, or c.€2.9bn. The beer segment also includes Smirnoff-branded seltzers and Smirnoff Ice, as well as regional beer brands such as Malta Guinness, Senator and Serengeti, as well as a number of lagers and ales in Ireland. However, Guinness is by far the main beer focus for Diageo, which is intent on positionin­g the stout as a premium tipple.

As one might expect, Diageo’s beer sales in Ireland from FY21 to FY22 grew by 71% as the prior year comparison saw the on-trade prohibited from trading for much of the period. Globally, Guinness volume increased by 16% year-on-year in FY22 and the sales value increase was 32%, indicating that the price of a pint has been jacked up. This is also evidenced by the Consumer Price Index, which shows that alcohol price inflation in the year to August 2022 was 8.0%.

The view from the Diageo boardroom is that ‘premiumisa­tion’ is the right place to be in the global drinks market. This thinking revolves around the idea that in the future consumers will ‘drink better, not more’. ‘Better’ means selecting a brand that is heavily supported with marketing and advertisin­g.

Diageo consistent­ly invests c.18% of net sales in marketing, though the group recoups that spend from the price it charges for its drinks. Diageo’s operating profit margin in FY22 was 28.5%. By contrast Unilever, the grocery products giant also selling into the mass market, has to make do with an operating margin of 15.2%.

“We believe that investing in our brands, even in periods of volatility, is the right way to grow their longterm equity and our business,” Diageo shareholde­rs are told in the annual report. “Our iconic global brand Guinness is well positioned for the key growth trends within the beer category as a premium, flavourful and differenti­ated beer.”

Part of the Guinness brand-building is two new Guinness visitor experience­s that are due to open in Chicago and London in 2023. Diageo says the investment cost for the Guinness microbrewe­ry and culture hub in Covent Garden will be €85m.

With confidence in the future of the black stuff, all other beer brewing is being relocated from St James’s Gate to a new brewery planned for Newbridge, which should be on stream in 2024. Having returned €4.6bn to shareholde­rs in dividends and share buyback in FY22, Diageo could fund the €200m Kildare project from its own resources, However, two state agencies – IDA Ireland and Enterprise Ireland – are chipping in unspecifie­d financial assistance from taxpayers for the brewery project.

 ?? MARC O’SULLIVAN ?? Diageo will receive unspecifie­d grant aid from two state agencies for its Newbridge brewery
MARC O’SULLIVAN Diageo will receive unspecifie­d grant aid from two state agencies for its Newbridge brewery

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