Friday 26 December 2014

Forget the Guinness publicity shots, drinks giant Diageo doesn't need us

Published 17/06/2013 | 17:00

Iconic: the Guinness brewery at St James’s Gate, Dublin. But our
relationship with the brand is more complicated than many realise.
Iconic: the Guinness brewery at St James’s Gate, Dublin. But our relationship with the brand is more complicated than many realise.

OTHER countries do state dinners and 21-gun salutes but it often seems that no visit to Ireland by a foreign leader is complete without a visit to a pub and a pint of Guinness.

We all know the pictures of grinning presidents, monarchs and prime ministers holding up a pint of the black stuff and then gulping it back. Even the 85-year-old Queen Elizabeth was offered an early morning pint during her visit to Ireland last year – an offer that, like most non-problem drinkers, she felt it was too early to accept.

All these photo opportunities convey a simple message that nothing is more Irish than Guinness.

In truth, the relationship between Guinness and Ireland is much more complicated than those happy snaps of world leaders downing a pint would suggest.

The brewery in the heart of Dublin's St James's Gate was a byword for sectarianism in the capital long after Independence. It had no qualms about selling drink to Catholics but it did everything it could to avoid employing them until the 1960s.

While there are many admirable aspects to the paternalistic capitalism practised by the Guinness family (and many other European breweries) the blatant discrimination continued far longer than it should have.

In the 1980s, as the IRA's bombing campaign spread to London and the rest of Britain, Guinness came close to scrapping the harp as its logo and denying its Irish heritage altogether. The harp that adorns our passports and other government documents is a treasured symbol for this country.

To the London-based drinks giant that owns Guinness since a disastrously corrupt 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 while the Marble City will get a €3m visitors' centre.

A few years ago, Diageo even decided to pull out of Dublin's city centre completely and move to a field on the M50, despite 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 yesterday, 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 in England where people are known to be blunt. Still, his direct comments on the possible consequences of a ban on drinks sponsorship took many aback. With a record like that, remarks like this are bound to make governments cringe.

The real question is what should the Government do in response.

Don't worry too much is probably the best answer. Diageo, as the company itself quickly pointed out yesterday, is currently spending €153m on the new brewery in Dublin, which is a significant investment by any standards. The 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, Ireland's ageing population and a well-documented move away from drinking for health reasons.

These fundamental changes in Ireland and other European countries 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 Mr Walsh to stay away from Asia and allow rivals to pour in. That mistake has cost Diageo sales and helps to explain why Mr 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 that it is something of a one-sided relationship.

Like a love-struck teenager, government after government 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.

Irish Independent

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