CASE: I Managing the Guinness brand in the face of consumers' changing tastes1997 saw the US$19 billion

merger of Guinness and GrandMet to form Diageo, the world's largest

drinks company. Guinness was the group's top-selling beverage after Smirnoff vodka, and the group's

third most profitable brand, with an estimated global value of US$1.2 billion. More than 10 million

glasses of the popular stout were sold every day, predominantly in Guinness's top markets:

respectively, the UK, Ireland, Nigeria, the USA and Cameroon.

However, the famous dark stout with the white, creamy head was causing some strategic concerns for

Diageo. In 1999, for the first time in the 241-year of Guinness, sales fell. In early 2002 Diageo CEO

Paul Walsh announced to the group's concerned shareholders that global volume growth of Guinness

was down 4 per cent in the last six months of 2001 and, more alarmingly, sales were also down 4 per

cent in its home market, Ireland. How should Diageo address falling sales in the centuries-old brand

shrouded in Irish mystique and tradition?

The changing face of the Irish beer market

The Irish were very fond of beer and even fonder of Guinness. With close to 200 litres per capita drunk

each yearthe equivalent of one pint per person per dayIreland ranked top in worldwide per capita

beer consumption, ahead of the Czech Republic and Germany.

Beer accounted for two-thirds of all alcohol bought in Ireland in 2001. Stout led the way in volume

sales and accounted for 40 per cent of all beer value sales. Guinness, first brewed in 1759 in Dublin by

Arthur Guinness, enjoyed legendary status in Ireland, a national symbol as respected as the green,

white and gold flag. It was by far the most popular alcoholic drink in Ireland, accounting for nearly one

of every two pints of beer sold. Its nearest competitors were Budweiser and Heineken, which held 13

per cent and 12 per cent of the market respectively.

However, the spectacular economic growth of the Irish economy since the mid-1990s had opened up

the traditional drinking market to new cultures and influences, and encouraged the travel-friendly Irish

to try other drinks. Beer and in particular stout were losing popularity compared with wine or the

recently launched RTDs (ready-to-drinks) or FABs (flavoured alcoholic beverages), which the younger

generation of drinkers considered trendier and 'healthier'. As a Euromonitor report explained: Younger

consumers consider dark beers and stout to be old fashioned drinks, with the perceived stout or ale

drinker being an old, slightly overweight man and thus not in tune with image conscious youth culture.

Beer sales, which once accounted for 75 per cent of all alcohol bought in Ireland, were expected to

drop to close to 50 per cent by 2006, while stout sales were forecast to decrease by 12 per cent between

2002 and 2006.

Giving Guinness a boost in its home market

With Guinness alone accounting for 37 per cent of Diageo's volume in the market, Guinness/UDV

Ireland was one of the first to feel the pain caused by the declining popularity of beer and in particular

stout. A Euromonitor report in February 2002 explained how the profile of the Guinness drinker,

typically men aged 21-plus, was affected: The average age of Guinness drinkers is rising and this is

bringing about the worrying fact that the size of the Guinness target audience is falling. The rate of

decline is likely to quicken as the number of less brand loyal, non-stout drinking younger consumers

increases.

The report continued:

In Ireland, in particular, the consumer base for Guinness is shrinking as the majority of 18 to 24 year

olds consistently reject stout as a product relevant to their generation, opting instead to consume lager

or spirits.

Effectively, one-third of young Irish men and half of young Irish women had reportedly never tried

Guinness. A Guinness employee provided another explanation. Guinness is similar to coffee in that

when you're young you drink it [coffee] with sugar, but when you're older you drink it without. It's

got a similar acquired taste and once you're over the initial hurdle, you'll fall in love with it.

In an attempt to lure young drinkers to the somewhat 'acquired' Guinness taste (40 per cent of the Irish

population was under the age of 24) Diageo had invested millions in developing product innovations

and brand building in Ireland's 10,000 pubs, clubs and supermarkets.

Product innovation

Until the mid-1990s most Guinness in Ireland was drunk in a pint glass in the local pub. The launch of

product innovations in the form of a new cooling mechanism for draft Guinness and the 'widget'

technology applied to cans and bottles attempted to modernize the brand's image and respond to

increasing competition from other local and imported stouts and lagers.

'A perfect head' for canned Guinness

In 1989, and at a cost of more than 10 million, Guinness developed an ingenious 'widget' device for

its canned draft stout sold in 'off-trade' outlets such as supermarkets and off-licences. The widget,

placed in the bottom of the can, released a gas that replicated the draft effect.

Although over 90 per cent of beer in Ireland was sold in 'on-trade' pubs and bars, sale of beer in the

cheaper 'off-trade' channel were slowly gaining in importance. The Guinness brand manager at the

time, John O'Keeffe, explained how home drinkers could now enjoy a smoother, creamier head similar

to the one obtained in a pub thanks to the new widget technology:

When the can is opened, the pressure causes the nitrogen to be released as the widget moves through

the beer, creating the classic draft Guinness surge.

Nearly 10 years later, in 1997, the 'floating widget' was introduced, which improved the effectiveness

of the device.

A colder pint

In 1997 Guinness Draft Extra Cold was launched in Ireland. An additional chilled tap system could be

added to the standard barrel in pubs, allowing the Guinness to be served at 4C rather than the normal

6C. By serving Guinness at a cooler temperature, Guinness/UDV hoped to mute the bitter taste of the

stout and make it more palatable for younger adults, who were increasingly accustomed to drinking

chilled lager, particularly in the summer

A cooler image for Guinness

In October 1999 the widget technology was applied to long-stemmed bottles of Guinness. The launch

was supported by a US$2 million TV and outdoor board campaign. The packagingwith a clear,

shiny plastic wrap, designed to look like a pint complete with creamy headwas quite a departure

from the traditional Guinness look.

The objective was to reposition Guinness alongside certain similarly packaged lagers and RTDs and

offer younger adults a more fashionable way to drink Guinness: straight from the bottle. It also gave

Guinness easier access to the growing number of clubs and bars that were less likely to serve

traditional draft Guinness easier access to the growing number of clubs and bars that were less likely to

serve traditional draft Guinness, which could be kept for only six to eight weeks and took two minutes

to pour. The RTDs, by contrast, had a shelf-life of more than a year and were drunk straight from the

bottle.

However, financial analyst remained sceptical about the Guinness product innovations, which had no

significant positive impact on sales or profitability:

The last news about the success of the recently introduced innovations suggests that they have not had

a notably material impact on Guinness brand performance.

Brand building

Euromonitor estimates that, in 2000, Diageo invested between US$230 and US$250 million worldwide

in Guinness advertising and promotions. However, with a cost-cutting objective, the company reduced

marketing expenses in both Ireland and the UK up to 10 per cent in 2001 and the number of global

Guinness agencies from six to two.

Nevertheless, Guinness remained one of the most advertised brands in Ireland. It was the leading

cinema advertiser and, in terms of advertising, was second only to the national telecoms provider,

Eircom. Guinness was also heavily promoted at leading sporting and music events, in particular those

that were popular with the younger age groups.

The ultimate tribute to the brand was the opening of the new Guinness Storehouse in Dublin in late

2000, a sort of Mecca for all Guinness fans. The Storehouse was also a fashionable visitor centre with

an art gallery and restaurants, and regularly hosted evening events. The company's design brief

highlighted another key objective:

To use an ultramodern facility to breathe life into an ageing brand, to reconnect an old company with

young (sceptical) customers.

As the Storehouse's design firm's director, Ralph Ardill, explained:

Guinness Storehouse had become the top tourist destination in Ireland, attracting more than half a

million people and hosting 45,000 people for special events and training.

The Storehouse also had training facilities for Guinness's bartenders and 3000 Irish employees. The

quality of the Guinness pint remained a high priority for the company, which not only developed pub-

like classrooms at the Storehouse but also employed teams of draft technicians to teach barmen how to

pour a proper pint. The process involved two stepsthe pour and the top-upand took a total of 119.5

seconds. Barmen also needed to learn how to check that the pressure gauges were properly set and that

the proportion of nitrogen to carbon dioxide in the gas was correct.

The uncertain future of the Guinness brand in Ireland

Despite Guinness/DUV's attempt to appeal to the younger generation of drinkers and boost its fading

image, rumours persisted in Ireland about the brand future. The country's leading and respected

newspaper, the Irish times, reported in an article in July 2001:

The uncertainty over its future all adds to the air of crisis that is building around Guinness Ireland

Group four months ago...The review is not complete and the assumption is that there is more bad news

to come.

In the pubs across Ireland, the traditional Guinness drinkers looked on anxiously as the younger

generation drank Bacardi Breezers, Smirnoff Ices or Californian wines. Could the goliath Guinness

survive another two centuries? Was the preference for these new drinks just a fad or fashion, or did

Diageo need to seriously reconsider how it marketed Guinness?

A quick solution?

In late February 2002, Diageo CEO Paul Walsh revealed that the company was testing technology to

cut the waiting time for a pint of Guinness from 1 minute 59 seconds to 15-25 seconds. Ultrasound

could release bubbles in the stout and form the head instantly, making a pint of Guinness that would be

indistinguishable from one produced by the slower, traditional method.

'A two-minute pour is not relevant to our customers today,' Walsh said. A Guinness spokeswoman

continued, 'We have got to move with the times and the brand must evolve. We must take all the

opportunities that we can. In outlets where it is really busy, if you walk in after nine o'clock in the

evening there will be a cloth over the Guinness pump because it takes longer to pour than other drinks.

Aware that some consumers might not be attracted by the innovation, she added 'It wouldn't be put

everywhereonly where people want a quick pint with no effect on the quality.'

Although still being tested, the 'quick-pour pint' was a popular topic of conversation in Dublin pubs,

among barmen and customers alike. There were rumours that it would be introduced in Britain only;

others thought it would be released worldwide.

Some market commentators viewed the quick-pour pint as an innovative way to appeal to the younger,

less patient segment in which Guinness had under-performed. Others feared that the young would be

unconvinced by the introduction, and loyal customers would be turned off by what they characterized

as a 'marketing u-turn'.

Question:

1. From a marketing perspective, what has Guinness done to ensure its longevity?

2. How would you characterize the Guinness brand?

3. What could Guinness do to attract younger drinkers? And to retain its older loyal customer

base? Can both be done at the same time?