Guinness

“Dealing With A Shift In Consumer Trends”

Tom Muldowney

X00039338

5th May 2009

                                             

Brief History•1759 – Arthur Guinness set up Guinness at St. James’s Gate Dublin

•1769 – Guinness sent to England

•1820 – Guinness sent to the Caribbean and Africa

•1840 – Guinness is sent to America

•1883 – St James’s Gate became largest brewery in world

•1885 – Guinness producing 1.2m barrels per annum

•1886 – Guinness became a public company

•1914 – Guinness producing 3m barrels per annum and employs 4,000

•1997 – Guinness and Grand Met merge to become Diageo

•2000 – Guinness Storehouse is established

•2009 – 10m pints of Guinness are enjoyed every day around the world

                                             

Alcohol Industry Today

• Most lucrative & high performing industry in Ireland - €7b revenue annually and employs over 100,000 people

• Since 2001, industry is suffering from withdrawal, especially the public house sector – in particular the beer category due to rise in wine and spirit consumption

• Guinness depentent on public house sales – 90% consumed in pubs

• 2008 saw a 6% drop in sales of alcohol in Ireland

• Change within Irish society seen with the fact that in 2001, 70% of alcohol was purchased in pubs and in 2008, it was only 51%

                                             

Competition Breakdown

• Alcohol industry in Ireland consists of 4 categories – Beer & Stout, Spirits, Cider & Wine

• Guinness faces competition from other stouts include Beamish, Murphy’s and other lesser known brands of stout

• Guinness - 85.1%, Beamish - 8.5%, Murphy’s - 5%, Others - 1.4%

• In 2008 – all categories experienced decline in volume consumed

• Industy is worth over €7b annually – highly competitive

• Also competing for “share of pocket” – consumers have more choice on how to spend their income – pubs, cinema, gym, sports etc.

                                             

Competition Breakdown

                                             

Key Issues

•Smoking Ban

•Introduced to Ireland at the end of March 2004

•Smoking now illegal in the workplace – including pubs & restaurants

•Sales of Guinness dropped by 6% at the end of that year alone

•Resulted in the closure of hundreds of small rural pubs

•Resulted in 440 fewer licence renewals the following year

                                             

Key Issues

•Driving Laws

•Considered the ‘norm’ in some rural areas to drink and drive

•Since late 1990’s – stricter laws on drink-driving – fines, bans and jail sentences

•People becoming scared to drink and drive now due to punishments and opting to stay at home and drink instead

•Coincided with drop in Guinness sales in Ireland

                                             

Key Issues

• Off-Licence Sales

• ‘Cocooning’ – Social trend on the rise – staying in and drinking

• Consumers felt they saved a lot of money by avoiding the pub before going out

• Rise in amount of off-licence premises opening while amount of pub closures increasing also

• Off-licence sales began to steadily rise – 12% annually

• Pub sales however began to steadily fall – 5% annually

                                             

Key Issues

•Rise in Wine Consumption

•1950 – 200,000 cases sold in Ireland

•1980 – Figure had tripled to 600,000

•1990 – Figure had triples again to 1.8m

•2002 – Figure had tripled once again to 5.4m

•2007 – 8.7m cases of wine now being sold

•More ‘sophisticated’ consumer emerging

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1950's 1980's 1990's 2002 2007

1950's

1980's

1990's

2002

2007

                                             

Tackling These Issues

• 18-35 year olds switching to lagers and spirits on nights out - Guinness needed to re-evaluate their product positioning

• Series of new adverts - Guinness began heavily advertising their canned products with a range of quirky and visually stunning campaigns - attract the younger generation

• Guinness Storehouse opened in 2000 – Helped reconnect with the younger market and breathe a new lease of life into the aging brand – welcomed over 4m people through it’s doors to date

• Sponsorship – Guinness Rugby Premier League, Rugby World Cup, Lions Tour 2009, African Nations Cup 2008, GAA All-Ireland Hurling Championship

• Music & Arts festivals – Guinness Cork Jazz Festival, Guinness Feile na nDeise Festival and Guinness Witness Festival

                                             

Key Learnings• Guinness is the best known of all consumer goods in Ireland

• Ireland, UK and US account for over 60% of all sales – have all experienced decrease in sales over the years

• Future may lie abroad – African Market experiencing rapid yearly growth – 17% increase from last year

• Penetrating markets such as Russia, China, India and Korea – important for future growth

                                             

Key Learnings• Guinness need to try harder to connect with the younger market –

advertising, sponsorship and promotion can play a key role

• Guinness Storehouse – important for the Irish market – keep Irish consumers interested in the brand and attract the younger consumer

• Comfortably ahead of other stouts in terms of marketshare and performance – major threats coming from spirits, beers and wines

• Recent sales figures for Guinness in Ireland have shown a 2% increase for 2009 – perhaps marketing campaigns are beginning to succeed or it could be possibly credited to the increase in unemployment – cheaper option and more people in the pub during the day

                                             

Thank You Very Much

Any Questions?