Plans for shake-up of Guinness brewing put on hold

DUBLIN, Ireland - The parent company of Irish beer icon Guinness announced Monday it may change or abandon plans to reform production in Ireland and open a new state-of-the-art brewery because of the struggling global economy.

Britain's Diageo PLC said it will review and may revise its original euro800 million ($1.1 billion) plans — unveiled to much fanfare in May 2008 in a panoramic pub atop the flagship Dublin brewery — because of deepening recession in Ireland and economic woes worldwide.

The London-based Diageo said in a statement it "has decided to conduct a re-evaluation of this brewing investment program in order to ensure its scope remains appropriate in the changed economic environment." It said the review would "run for several months" before any verdict.

Diageo had planned by 2013 to cut Guinness' brewing staff in Ireland by more than half, shut two breweries in the towns of Dundalk and Kilkenny, and reduce Guinness production at its Dublin brewery, one of Ireland's premier tourist attractions with a heritage dating back to 1759.

Critically, however, the plans presumed that Diageo could cash in on Ireland's decade-long property boom by selling off brewing property in urban locations. Taking their place in production would be a new mega-brewery in suburban west Dublin, to be built chiefly on land owned by the Guinness family.

But in recent months Ireland's property market has nosedived, and few if any buyers exist for Guinness' prime real estate today. Economists widely forecast no recovery in Ireland's jobs and property markets until 2010 at the earliest.

In its May 2008 announcement, Guinness said the new brewery would take on production of several beer brands as well as the secret-recipe "essence" extract that Guinness ships to its nearly 50 stout breweries worldwide. The existing Dublin brewery would become responsible exclusively for brewing stout for the Irish and British markets.

Monday's statement shed no light on whether Diageo might cancel or downgrade its plans for a new brewery — or intended to proceed with the closure of two existing breweries regardless.

The Diageo U-turn comes at a time of retrenchment and consolidation among the brewing giants of Western Europe, which face growing low-cost competition from Eastern Europe and Asia. Irish demand for Guinness and other dark-brown stout beers also has waned in recent years as youthful drinkers prefer foreign lagers and vodka-based drinks.

Diageo's major brewing competitor in Ireland, Heineken NV of the Netherlands, last month announced it was closing a brewery that for 210 years has produced Beamish, a local competitor to Guinness, in the southwest Irish city of Cork.

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