Belfast Telegraph

Saturday 19 April 2014

Glass half-empty as Guinness reviews its links with Ireland

There is undoubtedly no company which is more closely associated with Ireland than Guinness in most foreigners' minds.
There is undoubtedly no company which is more closely associated with Ireland than Guinness in most foreigners' minds.

Even the Queen was offered an early-morning pint during her visit last year – an offer that, like most non-problem drinkers, she felt it was too early to accept.

All these photo-opportunities convey the message that nothing is more Irish than Guinness. In truth, the relationship between Guinness and the Republic is more complicated.

The brewery in the heart of Dublin's St James's Gate was a byword for sectarianism in the capital long after Irish independence.

It had no qualms about selling drink to Catholics, but it did everything it could to avoid employing them until the 1960s.

In the 1980s, as the IRA's bombing campaign spread to the rest of Britain, Guinness came close to scrapping the harp as its logo and denying its Irish heritage altogether.

To Diageo, the London-based drinks giant that has owned Guinness since a disastrous merger in the 1980s, the harp is just another marketing logo to be kept, or binned, depending on circumstances. Alcohol is big business and big business is rarely emotional. Diageo is no exception.

Last year, it decided to pull out of Kilkenny, where it produces the successful Smithwick's in a once-family-owned brewery that has been operating on the same spot for more than 300 years. The ale will now be produced in Dublin. A few years ago, Diageo even decided to pull out of Dublin's city-centre completely, in spite of centuries of tradition. That decision, too, was later revoked for commercial reasons.

That's why everybody should sit up and take notice when the head of Diageo's Irish operations says casually, as he did in an interview published this week, that the company does not have to brew Guinness in Ireland, or make Baileys.

David Smith, the 44-year-old marketing man who made the remark, originally hails from Leicester, where people are known to be blunt.

Still, his comments on the possible consequences of a ban on drinks sponsorship took many aback. The real question is: what should the Dublin government do in response?

Don't worry too much is probably the best answer. Diageo, as the company itself pointed out, is currently spending £130m on a new brewery in Dublin, which is a significant investment by any standards. The Republic's property crash means that Diageo would get very little for the historic St James's Gate site today.

While Diageo likes to blame governments and other outside forces for its problems, the reality is that the drinks giant is the victim of much more fundamental shifts in the global economy and consumer trends.

If Diageo ever leaves Dublin, the decision will be taken in a London boardroom for those reasons, rather than any clampdown on drinks sponsorship that might come down the tracks this summer.

These shifts include the recession, an ageing population and a well-documented move away from drinking for health reasons. These fundamental changes help to explain why drinks companies are now channelling most of their energies into emerging markets.

India and China's vast middle-class are a much more tempting target than anything Europe, or the US, has to offer these days. Like cigarette, or car companies, the drinks giants are doing everything they can to get consumers in Asia hooked on their products.

The problem for Diageo is that outgoing chief executive Paul Walsh made a fundamental mistake by ignoring Asia after the company got burned there in the late-1990s, following the collapse of the region's economy.

That experience encouraged Walsh to stay away from Asia and allow rivals to pour in.

That mistake has cost Diageo sales and helps to explain why Walsh's successor will be Indian-born Ivan Menezes.

There is undoubtedly no company which is more closely associated with Ireland than Guinness in most foreigners' minds.

Whether this is a good thing or not is for others to decide, but there is no doubt in my mind that it is something of a one-sided relationship.

Like a love-struck teenager, government after government in Dublin has done everything it could to promote Guinness on the world stage.

As the latest comments about brewing Guinness outside Ireland show, the thanks for all that free advertising has been icy indifference.

Going on the past, we should not be too surprised.

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