(Adds union comment, update shares, changes to joint dateline)
By Andras Gergely and David Jones
DUBLIN/LONDON May 9 British drinks maker Diageo
will spend millions on a new brewery near Dublin, but Guinness
fans in Britain and Ireland will still get their dark beer from
the historic brewery in the heart of the Irish capital.
The London-based beer and spirits maker (DGE.L) said on
Friday it will renovate its central Dublin brewery at St James's
Gate to supply these drinkers, but will close two smaller sites
by 2013 and cut its Irish brewery workforce by more than half.
In five years, when the new brewery opens after an
investment of 520 million pounds ($1 billion) and smaller ones
at Kilkenny and Dundalk are closed, Diageo says its Irish
brewing workforce will be cut by 250 from its current 450.
The move means a reprieve for the St James's Gate site near
the River Liffey, where Arthur Guinness started brewing his
stout beer in 1759 after purchasing the dormant brewery with 100
pounds he had been left in his godfather's will.
"Every option was looked at. That includes the closure of St
James's Gate. We did some research, we listened to our
consumers, we heard what everybody said and we understand the
importance of St James's Gate," David Gosnell, Diageo's global
supply director, told a Dublin news conference.
Diageo Chief Executive Paul Walsh said the move had been
prompted by efficiency gains to be made by focusing most of its
Irish beer production on one site, and also to meet the growing
export demand for Guinness especially from Africa and Asia.
"This reaffirms Diageo's commitment to Guinness and at 650
million euros is the largest investment in the history of
Diageo," Walsh told a conference call. Beer earns a fifth of
Diageo's profit, of which Guinness accounts for around half.
But Walsh declined to specify what cost savings would be
made as these will only occur in 2013 and beyond. Diageo will
take a one-off charge of 120 million pounds to implement the
plan in its accounts for the year to June 2008.
Surplus land on the 55-acre St James's Gate site and the two
breweries being closed has a current value of around 400 million
pounds, the company said.
Walsh said the new brewery site has yet to be determined and
the group is looking at a number of options. The move will raise
its Irish annual brewery capacity by 20 percent to 9 million
hectolitres, with 6 million from the new brewery.
Ireland's SIPTU trade union called for all redundancies to
be voluntary. "Obviously the fact that the company expects to
generate large profits from disposing of property assets means
it will be in a strong position to provide adequate compensation
to employees," said SIPTU branch organiser John Dunne.
The new greenfield brewery will produce Guinness for export
and other beers such as Harp and Smithwick's for the Irish
market, while the Guinness Storehouse, Ireland's leading visitor
attraction, will remain on the St James's Gate site.
"This is a major investment that secures the future of
brewing in Ireland. I also welcome the company's intention to
retain and upgrade the St James's Gate brewery which is of great
historic significance to Dublin," said Ireland's Deputy Prime
Minister Mary Coughlan.
The drinks company launched a review last June of its Irish
brewing operations, following its move in 2004 to close its
London Park Royal brewery and move Guinness production to
Dublin. The St James's Gate site also exports Guinness-flavour
extract to 42 other Guinness breweries around the world.
Sales of Guinness, which gets its trademark dark colour from
dark roasted barley, fell 7 percent in Ireland and 3 percent in
Britain during Diageo's last financial year to the end of June
2007, but worldwide sales grew 3 percent helped by growth in
Africa, especially Nigeria, and also in Asia.
Shares in Diageo, which also makes Smirnoff vodka and
Johnnie Walker whisky, were up 1 percent to 10.38 pounds by 1447
GMT in a London market off 0.9 percent.
(Additional reporting by Paul Hoskins in Dublin; Editing by
Jason Neely and Quentin Bryar)