Guinness sales slumped 9 per cent in Ireland in the second half of last year, as wine and spirits grew in popularity and more people chose to drink at home instead of in pubs.
The company moved to mitigate the drop in demand for the stout by raising the price of a pint by four cents in June. As a result, it stemmed the decline in Guinness revenue to 2 per cent.
Diageo, the British owner of Guinness, also attributed volume declines to a "particularly hot summer," when average temperatures reached a 10-year high. Consumers often switch to lighter brews, wine and cocktails during warmer weather.
The 247-year-old brand is fighting increased competition from the supermarkets and off- licences that are selling beer at a discount to cater for rising demand for home consumption. The country's pub market, known as the "on trade," shrunk 3 per cent in the second half of 2005, compared to an 8 per cent increase in alcohol in the take-home market, according to Michael Patten, Diageo Ireland's director of corporate relations.
"This has been an ongoing trend for years," Mr Patten said. "The on-trade market is strongly focused on beer and the off trade is mainly wine and spirits-focused. This is always going to be a problem for Diageo because it's so heavily reliant on beer sales in the on trade."
About 55 per cent of all alcohol is now sold in pubs. While the rate remains one of the highest in Europe, it's down from 65 per cent in just a few years. The introduction of the smoking ban in pubs, in March 2004, accelerated the switch to at-home drinking, though the effect has since "washed through", Mr Patten said.
In addition, younger drinkers are abandoning what was once our favourite tipple in favour of trendier cocktails and wine. Volumes of Diageo's spirits, including Smirnoff vodka, climbed 4 per cent in the last six months of 2005, while sales of wine brands such as Blossom Hill were up 15 per cent.
Ireland's beer market didn't grow at all last year, government figures show.
Indeed, Diageo Ireland's beer volumes dropped 6 per cent over the six-month period. Carlsberg, which Diageo brews under licence for its Danish owner, slowed its volume decline to 1 per cent after successful new advertising helped the brand capitalise on a hot summer.
Diageo, formed by a 1997 merger of Guinness with the UK's Grand Metropolitan, is seeking to revive demand for Guinness in its home country by rolling out new versions of the stout. Guinness accounts for about a fifth of Diageo's operating profit worldwide and Ireland is one of the brand's top three markets.
Thirty years after its spectacular failure to launch the low-alcohol Guinness Light under the tag line "They said it couldn't be done," St James's Gate is giving it another shot by introducing Guinness Mid-Strength.
The new brew contains 2.8 per cent alcohol per volume, less than the 4.2 per cent ABV of the standard stout. The company said last week that drinkers in 80 bars across Co Limerick will test Guinness Mid-Strength over the next month. "There's a body of consumers out there saying 'I'd love to have a beer, but I have to be up early in the morning'," Mr Patten said. "Research shows there's a latent consumer need out there.'"
Guinness also began selling a limited edition of the stout, called Brew 39, in 300 Dublin pubs in the autumn. It will introduce its second stout in the Brewhouse series this summer.
Diageo, the world's largest distiller, was more successful with Guinness in other countries: Volumes jumped 12 per cent in North America, helped by advertising and promotions, and also increased in Asia and Africa.
But it was sales of spirits such as Smirnoff and Johnnie Walker whiskey that helped Diageo's profit grow as a whole. Net income for the entire company rose 19 per cent to £1.21 billion pounds (€1.77 billion).
