Diageo unveils brewing masterplan for Ireland

May 10, 2008: Diageo, owner of the Guinness brand, plans to invest €650 million (£520 million) in a new "world-class" brewing centre in Ireland to support the growth and development of its global beer business.

This proposal would result in the rejuvenation of the historic St James’s Gate brewery, in Dublin, and the construction, close to the city, of a state-of-the-art brewery, which would produce all beer types.

The would be closures, however, of the company's existing breweries at Kilkenny and Dundalk, and the whole exercise could result in the loss of 250 jobs by the end of 2013.

The announcement follows a comprehensive assessment of all brewing operations in Ireland, undertaken over the past 12 months. The assessment identified the optimum strategy to deliver the global competitiveness necessary for future growth and sustained success.

Paul Walsh, chief executive of Diageo plc, said: “This will be the single biggest capital investment made by Diageo in its supply infrastructure since the company’s creation 10 years ago and will enhance the cost competitiveness of our global beer operations.

"It represents a major vote of confidence in our beer business and in Ireland as a global brewing centre of excellence for our company.

“This proposal will support the long-term success and growth of Guinness around the world, as well as the other beers we brew for Ireland, Great Britain and international markets.

"Our ambition is to create a brewing hub which will meet the highest standards of technology, efficiency and environmental management. It will marry 21st century solutions to our 300 years of brewing tradition, craft and heritage in what I believe will be a winning combination.”

Diageo says that under the investment proposal:

l The famous St James’s Gate brewery will be upgraded and consolidated to produce Guinness primarily for the Irish and British markets. When the programme is completed the brewery will be the second largest in the country. The Guinness Storehouse will continue its development programme to accommodate growing visitor numbers, now expected to surpass one million people per year.

l A new brewery will be built on a suitable site close to Dublin. Details of the location of the new brewery will be the subject of a further announcement in due course. It will utilise leading-edge brewing technologies to deliver the best international standards of scale, efficiency, quality and environmental performance. On completion in 2013 it will be Diageo’s biggest brewery and the largest in Ireland. It will produce Guinness to meet growing export demand as well as ales and lagers. As consumers would expect, the new brewery will use the same brewing ingredients — high quality water supply, yeast, hops, malts and barley — as well as the same traditions of craftsmanship.

l Regrettably, when the new brewery is commissioned in 2013, all production from existing breweries in Kilkenny and Dundalk will be transferred, resulting in the closure of these facilities. Both of these breweries have played a critical role in the historic success of Diageo’s beer brands in Ireland, but currently do not have the scale necessary for sustained success in increasingly competitive market conditions. They are also not suitable sites for the size of the new brewing operation, which must be constructed while existing operations are maintained. Similarly, the assessment determined that it would not be feasible to concentrate all brewing activity on a single site at St. James’s Gate due to substantial operational and logistical difficulties.

l Operations at Diageo’s Waterford Brewery will be streamlined as part of the re-organisation, resulting in some reduction in output. The Belfast packaging facility is unaffected by these developments.

l When the new breweries are operational from 2013 onwards, Diageo anticipates a net reduction of approximately 250 employees. Diageo will ensure that affected employees are offered relocation opportunities where possible but, where this is not possible, they will be offered a severance package alongside career counselling and outplacement support.

l Following the completion and successful commissioning of the new breweries, surplus land on parts of the St James’s Gate site, as well as in Dundalk and Kilkenny, will be available for redevelopment. This surplus land is estimated to have a current value of approximately €500 million (£400 million).

l Additional estimated one-off cash costs of €150 million (£120 million) are expected relating to the proposed restructuring of the brewing operations.

The company will now engage in formal consultation with employees on the implementation of the proposal.

Mr. Walsh paid tribute to employees who may be affected by this proposal. “Diageo values enormously the contribution of our staff to our business and we recognise the impact this proposal would have on employment levels," he said. We will work with our staff to reduce the effects of our plans as far as possible.

"I also want to fully acknowledge the huge role and heritage of the Kilkenny and Dundalk breweries, which would cease operations once the new brewery is fully commissioned. I believe that the lessons and experience we draw from their valuable tradition and heritage can only help to enrich our new brewery.”

Diageo insists it is committed to ensuring that any redevelopment at St James’s Gate, Kilkenny and Dundalk sensitively reflects the historical importance and heritage aspects of those sites.