Diageo brews Irish Guinness overhaul

Brian Duffy, who travels the world promoting Guinness as its global brand director, said Arthur Guinness was a visionary but unsentimental businessman who negotiated a bargain 9,000-year lease on the St. James' Gate site. He noted that Arthur Guinness had moved there from another location in search of better profits.

"I firmly believe if Arthur was here today, he would tell us to hurry up and get on with it, and would endorse it as the right thing to do," Duffy said of Diageo's plan.

The company estimates that much of the cost of the project can be reclaimed by selling land at the Dundalk, Kilkenny and Dublin sites valued at an estimated 500 million euros ($775 million). Property prices in Ireland have soared over the past decade as the economy has grown, but have dropped this year in line with the global credit crisis.

Officials in the two towns losing breweries expressed shock at the news.

The Great Northern Brewery in Dundalk mainly produces Guinness' sister beers -Harp lager and Smithwick ale -as well as continental European lagers under license, including Denmark's Carlsberg and Germany's Warsteiner.

The St. Francis Abbey Brewery in Kilkenny produces Irish-brand ales and U.S. brand Budweiser for the Irish market, where lighter beers, ciders, wines and vodka-based drinks have made steady inroads versus Guinness over the past decade.

The new suburban Dublin brewery would absorb all of the beer production currently carried in Dundalk and Kilkenny. It also would produce Guinness for continental European and global export, as well as the secret-receipe "essence" extract that Guinness ships to its nearly 50 breweries worldwide.

Diageo's smallest beer-related facility in Ireland, in the city of Waterford, also will continue to produce the "essence" extract. But supply director O'Hagan said staff there would be cut from 27 to 18.

Production of the company's two world-recognized local spirits -Bailey's Irish Cream in the Irish Republic and Bushmills whiskey in the British territory of Northern Ireland -will not be impacted by the brewery shakeup.

Diageo shares slipped 0.5 percent at 1,023 pence ($19.99) on the London Stock Exchange.