Dark times for the black stuff?

Guinness has a reputation for innovation and memorable ads, but as sales of stout fall, owner Diageo has had to look abroad for growth. By Mark Choueke

Despite running some of the most iconic ad campaigns of the past two decades and earning the brand a reputation for strong innovation, Diageo has long overseen a decline in the fortunes of Guinness. The fact that the UK stout and ales market, and the wider beer market, is struggling offers scant consolation.

According to Diageo, 2004/05 saw Guinness sales in Great Britain fall 1%, although values were up 4% due to price rises – good news for shareholders, but not consumers. In the first half of the 2005/06 year however, it reported a decline in both volume and value sales, down 5% and 3% respectively.

The brand celebrates its 250th anniversary in 2009 but one senior buyer believes the time may fast be coming for Diageo to ditch Guinness and concentrate its efforts on spirits, where it competes strongly in the global market with many premium brands including Johnnie Walker Scotch whisky, Smirnoff vodka, Bailey’s liqueurs and Tanqueray gin.

He says: “Guinness has an older profile of drinker and with an ever-increasing availability of continental lagers and a fast-growing range of alcopops, the younger generation of drinkers simply haven’t bought into it.

“Innovation – widgets and gadgets – will keep the brand alive for a while but where else can Diageo go? Flavoured Guinness? No thanks. It is in decline and Diageo’s best minds can’t do much about it.

“The brand may have only a couple of decades worth of life in it and I would milk it for everything before getting rid of it and concentrating on spirits,” adds the buyer.

Unsurprisingly, Guinness GB marketing director Russell Jones sees a far more positive picture. He claims Diageo is betting the future success of Guinness on a blend of strong advertising (MW last week), for many years created by Abbott Mead Vickers.BBDO, and innovation that has made the beer a global icon, available in 250 countries.

Jones says: “Many beer brands build market share by improving distribution arrangements but we have fantastic distribution. Our aim is to keep improving our rate of purchase and the key driver behind increasing both that and market share over the past decade has been our advertising.”

Jones denies that the youth market’s relative lack of interest is a worry, claiming that the majority of British drinkers are over 35. He admits younger drinkers are not his primary focus but adds that the introduction of Guinness Extra Cold in 1999, sports sponsorships such as the association with the Rugby Union Premiership – which began last year and will last at least four years – and advertising that “gets people talking” mean young people are at least aware of the brand and will try it.

Where others saw the closing of the London Park Royal production facility and the return to the brewing of Guinness Draught at the St James’s Gate brewery in Dublin as a necessary stripping of costs, Jones sees it, from a marketing perspective at least, as a triumph, adding to consumers’ authentic perception of Guinness.

The launch of Guinness Surger – a plug-in unit promising to deliver the perfect pint at home by sending ultra-sonic sound waves through the special Guinness Draught Surger beer – earlier this year (MW February 23) will be at the centre of further innovation in the near future according to Jones. “There’s still a lot of mileage in the Surger idea,” he says, adding: “Globally, the brand has got great potential.”

The global market is crucial to the belief within Diageo that anybody talking about a sell-by date for Guinness should be laughed out of town. For though Guinness is the number five beer brand in the UK and the number one non-lager brand, selling more than 2 million hectolitres every year, it is abroad where the black stuff provides Diageo with genuine growth.

One analyst says: “We tend to think of Ireland and the UK when we talk about Guinness, but it is in the US and African markets among others the brand is enjoying greater fortunes. Here in the UK, the past six months have seen Guinness fall 5% year on year, but in the same time span it has seen 12% growth in North America. In Africa Diageo has seen 10% year-on-year growth every year for a decade and the key driver for that has been Guinness, which is 80% of its African business. Africa is in Diageo’s top five markets and up until a couple of years ago it was number three.”

The brand thrives in many countries as it varies advertising according to each market. For instance, where UK consumers see black and white executions featuring surfers and wild horses emerging from the ocean, African drinkers see ads based around a fictional James Bond-type character, Michael Power.

The analyst says: “Globally, Guinness advertising is well managed with a range of different executions. Internationally, there is nothing wrong with Guinness whatsoever, either from a brand or a business point of view.”