A report on Wednesday that Diageo is seeking to divest its beer portfolio, including a number of long-established Irish brands but not its flagship Guinness stout, raised eyebrows in the drinks market here.
Diageo itself said it never comments on “market speculation”, which isn’t exactly denying a story that appeared on the reputable Axios platform. Nothing to see here, was the guidance from sources close to the company. Time will tell.
On one level it seems peculiar timing given that the drinks giant has a live planning application with An Bord Pleanála for a new €200 million brewery in Co Kildare.
In a recent interview with The Irish Times, Barry O’Sullivan, managing director and chairman of Diageo Ireland, said the Kildare facility would produce all of its beer here with the exception of Guinness and Guinness 0.0. This would free up room at its St James’s Gate brewery in Dublin for an expansion of its Guinness products, notably the zero alcohol brand extension that is gaining traction in the market.
Diageo’s other Irish beer brands include Smithwick’s and Kilkenny ale, and Hop House and Harp lagers. It also has a contract to brew Carlsberg for the Irish market.
On another level building a modern facility on a separate site to brew all the non-Guinness products would fit neatly with a plan to sell that portfolio to another party. It would represent a clean break for any new owner once the brewery is up and running.
Axios reported that the Diageo beer brands were a margin drag on the rest of the business. It’s worth remembering that Diageo is the world’s biggest spirits-maker, with a portfolio of beers tagged on (beers accounted for 14 per cent of overall sales last year versus 81 per cent for spirits).
Guinness is a global brand with a resonance well beyond these shores so it’s not a surprise that Diageo would want to retain the famous stout, which is in growth mode.
If the Axios story is true then Diageo will have all its fingers crossed that An Bord Pleanála gives it the green light for the Kildare brewery. Otherwise the neat plan might begin to unravel.