Sales of Guinness in Ireland down 6%

US President Barack Obama’s endorsement of the “black stuff” failed to deliver a lift to Guinness in Ireland as sales fell 6% this year.

Drinks giant Diageo, the world’s biggest spirits group, said high levels of unemployment and personal tax increases in Ireland continued to restrict consumer spending, particularly in the on-trade.

There were fears yesterday that the company could cut more costs in Ireland, with Andrew Morgan, European president of Diageo, saying that the company will continue to look for ways to become more efficient as a business and “be around for a very long time”.

“We have been having to take efficiencies. Where possible that’s been through natural wastage,” he said.

Although one in three pints bought in a pub in Ireland is a Guinness, net sales fell in the year ended June 2011 due to lower sales in the on-trade, while the volume of Diageo’s packaged beer increased in the growing off-trade.

Drink sales in Ireland and the North fell by 3% this year while sales of Guinness fell 6%. In the developing world, however, Guinness sales jumped by 10%.

Mr Morgan said sales of Guinness were dependent on the pub trade, which has taken a hit as Irish consumers have less disposable income.

In Ireland, Diageo produces Guinness, Baileys and Bushmills. Guinness generates more then €1.3 billion in domestic and export net sales, according to Diageo.

Also in that period Baileys returned to growth as did Bushmills. Carlsberg also sold well in the off-trade in Ireland while Captain Morgan doubled in size. Net sales of spirits grew 2%.

Diageo currently employs 1,700 people in Dublin, Dundalk and Kilkenny, as well as in their Bushmills plant in Co Antrim.

On a group level Diageo’s pre-tax profits increased by £121 million (€137m) to £2.36bn for the year ended June 2011.

Diageo set a 10%-plus earnings growth target, when it announced its 16% rise in its full-year earnings.

The British-based maker of Smirnoff vodka and Johnnie Walker whisky was upbeat about current trading, saying it had not seen the effect of poor weather and weak consumer demand which undermined brewer Heineken.

Finance director, Deirdre Mahlan, said: “We have finished the year strongly, the last couple of months of July and August have continued along the same trajectory. We feel confident over the last two months.”

She also said Diageo was a more balanced business than Heineken with a broader base, and although the southern European markets of Greece and Spain saw sales falling, emerging markets in Latin America, Africa and Asia grew strongly, and even North America saw some growth.

Citi analyst Andrea Pistacchi said in the context of poor results from the brewers, Diageo’s results were a relief.