Just when Guinness was getting over the effect of the smoking ban, along came another obstacle - Ireland's "particularly hot summer". Sales of the stout dropped 9 per cent in volume terms in the six months through December, parent company Diageo said yesterday. Met Éireann, Diageo tells us, described the summer as the hottest in a decade.
"We believe that C&C picked up some of that market share with Bulmers," said Jane Riordan, an analyst at NCB Stockbrokers. "Guinness is just not a summer drink." However, even if a particularly bad summer this year compels consumers to stay in pubs to consume a pint of plain instead of a refreshing lager, it's not likely to pull Guinness out of the doldrums anytime soon. Ireland's bar trade has been in decline since August 2001, according to the Central Statistics Office.
Waning demand for nights out in the local has been exacerbated by the introduction in 2004 of the smoking ban, a law that led many dedicated smokers to bypass the pub in favour of the off-licence or supermarket.
"Guinness has been hit in the long term because many pubs have been quiet - a pint with a cigarette was the way to go," Ms Riordan said. "Guinness is not going anywhere for a long time, but it is losing market share." Irish bar sales fell every month, year on year, between April 2004 and April 2005, the CSO has said. Even though volumes picked up in May 2005, they have not returned to pre-ban levels, Davy Stockbrokers pointed out. Consumers are, it seems, getting accustomed to nights in with wine, spirits or discount beer.
"Going back 20 or 30 years, the Irish market for us was little else but Guinness," said Michael Patten, Diageo Ireland's director of corporate relations. "But change in consumer trends has led to growth in off-trade sales. Clearly, Guinness can't buck that trend, but we are trying to grow and maintain our share of the on trade."
Young consumers, too, are following trends set in the US, the world's largest spirits market, by opting for hip vodka and whiskey brands. The US market has enjoyed a cocktail revival ever since the four stars of the now defunct Sex and the City TV series were depicted drinking Cosmopolitans.
As a result, Diageo's spirits volumes climbed 4 per cent in Ireland, while beer volumes slumped 6 per cent. A similar trend has occurred in the UK, where the beer market has been in decline for more than 16 years.
Diageo may have to resign itself to focusing on the expanding domestic spirits market and on Guinness exports to new markets in Russia and Asia for growth instead of relying on a possible revival in the stout at home.
It doesn't help that Diageo isn't making up for waning demand in the UK and Ireland in the rest of Europe.
The distiller sold 1 per cent less alcohol in Europe in the second half of 2005, as beer volumes declined 5 per cent and ready-to-drink cocktails such as Smirnoff Ice slid 24 per cent. Operating profit, though, climbed 7 per cent after a shake-up in the European business and a reduction in marketing costs.
Consumers in continental Europe are spending less time in bars and pubs as lacklustre economic growth, especially in France and Germany, eats into their disposable income. European brewers from Heineken to Scottish & Newcastle all have suffered in their home market in the past few years, focusing instead on international markets to generate growth.
"All over Europe there are changing demographics, and older people are going straight home for a bottle of wine instead of going to the pub after work," NCB's Riordan said. "Diageo is trying to make the company as lean as possible in Europe to get through the difficult situation."
