Sales of Guinness in Ireland are continuing to decline and, if anything, the rate of decline is accelerating.

Mr John McGrath, chief executive of the Diageo group which owns Guinness, said in a trading statement yesterday that volume sales of Guinness brand in Ireland "is expected to be down 4 per cent" in 12 months to the end of June.

This compares with a sales decline of 3 per cent suffered in the six months to the end of December, indicating that the sales setback is worsening.

The sharp reduction in Guinness sales in Ireland over the year to the end of last month followed unchanged sales in the year to the end of June last year.

The reduction in Irish sales is mainly ascribed to growth in popularity of rival products, notably wine, cider and ready-to-drink products such as Smirnoff Ice and Bicardi Breezer.

Although demand for Guinness in Ireland has fallen significantly, the impact on the group's brewery at St James's Gate, Dublin, has been softened by increased exports of Guinness.

Shipments of draught Guinness to the growing US market increased by 6 per cent in the six months to June 30th.

The Guinness brand has also continued to perform strongly against a declining beer market in Great Britain. Full year Guinness volumes in Britain are expected to be 3 per cent higher, lifting export shipments from St James's Gate in the process.

Even so, the accelerating decline in Irish demand for Guinness has plainly contributed to the emergence of surplus capacity at Guinness Ireland's brewing operations, prompting the current review to cut production capacities through brewery closures.

Diageo's sales of global priority brands including Bailey's Irish Cream are expected to have increased by 10 per cent in the year to end-June despite abolition of the European duty free market.