The Indian Institute of Business Management & Studies

Subject: Marketing Management

CASE: I Managing the Guinness brand in the face of consumers’ changing tastes

1997 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 year—the equivalent of one pint per person per day—Ireland
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

The Indian Institute of Business Management & Studies
Subject: Marketing Management

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.
The Indian Institute of Business Management & Studies
Subject: Marketing Management

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 4ºC rather than the normal 6ºC. 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
packaging—with a clear, shiny plastic wrap, designed to look like a pint complete with
creamy head—was 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:
The Indian Institute of Business Management & Studies
Subject: Marketing Management
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
steps—the pour and the top-up—and 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 everywhere—only
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.
The Indian Institute of Business Management & Studies
Subject: Marketing Management
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?