Diageo brews $1.25B Irish overhaul

The British beverage maker decided not to close the landmark Guinness brewery, one of Dublin's oldest businesses and a top tourist attraction, after concluding this would do too much damage to its brand image and customer sentiment.

Diageo expects to lay off about 250 people, or 58 percent of its current brewery work force in Ireland, over the next five years. Brewing staff at the Guinness brewery at St. James' Gate in west Dublin will be slashed to 65 from 230.

Half of the riverside St. James' Gate site will be sold for private development, and the volume of Guinness brewed there will be cut by about a third -to about 500 million pints annually. This will exclusively supply the Irish and British markets, where demand has slipped over the past decade in line with pubgoers' diversifying tastes.

David Gosnell, Diageo's managing director of global supply, said the move to a new suburban mega-brewery was necessary to compete with the rise of lower-cost breweries in Eastern Europe, Russia and China.

"The business is hugely competitive. ... Smaller breweries are consolidating and closing in Western Europe," Gosnell told a news conference inside Guinness' panoramic Gravity Bar, which offered a 360-degree view of a mist-shrouded Dublin.

The new plant is expected to employ about 100 people, many of whom could come from the current Guinness brewery.

Two other breweries employing more than 170 in the towns of Dundalk, north of Dublin, and Kilkenny to the south would close by 2013. Few of those workers are expected to relocate. Those breweries produce many other beer brands, but not Guinness.

Gerry O'Hagan, supply director for Diageo in Ireland, said the current production capacity of the Dublin, Dundalk and Kilkenny breweries was less than 1.25 billion pint glasses of beer annually, while the new plant would be able to produce more than two-thirds of that on its own.

Diageo executives said they planned to spend 800 million euros ($1.25 billion) on the plan. Nearly three-quarters would go on building the new plant at an as-yet-undisclosed location, most of the rest on closing the two breweries and paying off staff.