Brewer to shut two plants and cut 250 jobs

BUSINESS PLAN:GUINNESS IS to close its breweries in Dundalk and Kilkenny and scale back production at St James's Gate, its home since 1759, with the loss of 250 jobs, its parent company Diageo announced yesterday.

But St James’s Gate, the iconic brewery that forms part of the Dublin skyline, will remain the home of Guinness, with an upgraded brewhouse built on the site as part of a €650 million investment by Diageo in its Irish operations.

The plan will be largely financed by the sale of about half the surplus land at St James’s Gate in 2013, when Diageo will also open a new brewery – its largest in Ireland – at a site on the outskirts of Dublin.

Diageo has not yet confirmed the exact location of the new brewery, saying yesterday that it was still examining several possible sites. These are thought to include a site at Clondalkin in west Dublin.

Construction on the new brewery will start next year and is expected to be completed in 2013, when it will become the hub for international exports of Guinness.

All production from the St Francis Abbey brewery in Kilkenny and the Great Northern Brewery in Dundalk will be transferred, resulting in the closure of the two breweries. There will also be some cutbacks at Diageo’s Waterford brewery.

There was mixed reaction yesterday to the long-awaited outcome of Diageo’s review of its brewing operations in Ireland.

Tánaiste and Minister for Enterprise, Trade and Employment Mary Coughlan said the investment would secure the future of brewing in Ireland, but that it was important to start work immediately to minimise the impact of the 250 job losses.

Employers’ group Ibec called it “a stunning vote of confidence” in the State as a location for business and hailed the €650 million plan as the biggest single investment in the history of the Irish food and drink sector.

But Labour Party employment spokesman Willie Penrose said it was a blow to the local economies in Dundalk and Kilkenny and represented a further decline in manufacturing employment. He said Diageo was a very profitable company and that no changes should be implemented without agreement from workers.

Diageo made profits of £2.1 billion in its last financial year, and profits are growing at a rate of 9 per cent per annum.

It has turned around sales of Guinness in Ireland and Britain after a subdued period, while globally, sales of the stout are up 6 per cent.

Diageo chief executive Paul Walsh said the loss of 250 jobs was regrettable but necessary in a “hugely competitive” global drinks industry.

“To those 250 colleagues, I can only apologise,” Mr Walsh said.

The job cuts mean that Diageo’s core brewing staff in Ireland will shrink by more than half. It employs 434 people in its brewing operations, but it is envisaged that the new brewery will employ about 100, with 65 brewing staff remaining at St James’s Gate and 18 at Waterford.

The new Dublin brewery will have the capacity to produce about one billion pints a year and will brew Harp, Smithwicks, Carlsberg and Budweiser as well as Guinness.

Production at the St James’s Gate brewery will be cut by a third, but it will remain the single largest producer of Guinness.

About €100 million will be spent upgrading and remodelling St James’s Gate.

Surplus land to be sold from the city centre site is currently valued at €500 million.

This money will be reinvested in the brewing operations. Diageo also expects to spend a further €150 million to complete its restructuring.

Mr Walsh said the value of the unused portion of the St James’s Gate site had not played a major role in Diageo’s decision.

“The property issue is a side show given the value of the brand we have,” he said.

Diageo Ireland chairman and Guinness global brand director Brian Duffy assured Guinness drinkers that every single pint of the much-loved stout will still come “straight from the Gate”.