Tim Hampson reports on the rise and progress of Ireland's leading names on the global market
27 August, 2008
The Irish beer and cider industry revolves around two main players - for one it might not be the best of times, for the other it is probably the worst of times. The acid test for old stager Guinness and new kid Magners is how they deal with adverse trading conditions. Both brands share one thing in common - fantastic marketing campaigns, which are essential to keep the tills ringing .
But in recent weeks both groups have reported poor trading in their main overseas and home markets. C&C International, wh ich makes the over-ice phenomenon Magners cider, said trading performance deteriorated at an unexpected rate during the second half of July and it expects interim operating profit to fall by around 35 per cent on the previous year.
Sales were falling as fast as the rain which drenched vast trac ts of the UK throughout the summer and causing a significant slump in pub trade . The producer said Magners' weak performance reflects both the sustained period of poor weather in Great Britain and Ireland and increased competition in Great Britain.
It added cider sales volumes for the month of July were significantly down on the same period last year.
In Ireland the brand is marketed as Bulmers, but it uses the Magners names overseas as the Bulmers name i s owned by Scottish & Newcastle in other markets.
It all shows a lot can change in 12 months . In 2006, according to company figures, sales of Magners grew by 225 per cent after it went on sale in England for the first time, having been available in Scotland since 2003.
Certainly competition has increased. Brewing giant Scottish & Newcastle has reinvigorated its Bulmers Original brand and it has been stealing market share from C&C's Magners in packaged pint bottles. And the brewing giant has stolen a further march on Magners with the launch of the Bulmers brand on draught and over ice too.
For the past four months Bulmers Original Draught over ice has been on trial in the UK throughout the S&N Pub Enterprises estate but, although predicted, Magners on draught has yet to appear.
The Magners team is not daunted by the opposition, however. O n winning the title of Marketer of the Year, Magners' Maurice Breen said: "We are making the most of a great Irish product and are at the early stages of developing a powerful long-term brand.
"Marketing has been at the heart of Magners' development, backed by a managing director and a board who have been visionary and brave in providing the resources necessary to break Magners internationally."
He added: "Much of what is good about Magners comes from Bulmers in Ireland and our brand here has never been stronger. We believe that there is much more development to come from Magners and that to date, only the first couple of chapters of the case study have been written."
C&C International's determination to continue to invest in marketing is put into context by the fact that, while the advertising spend remains high, 70 production jobs have been lost at the Irish cider maker.
Guinness conquers new markets
In contrast, Diageo's marketing department has been successfully reinventing its Irish stout brand for decades.
While common wisdom would have it that the UK and Ireland are the two biggest markets for Guinness , in fact Nigeria has overtaken Ireland as the second-largest market as Guinness is increasingly pushed internationally.
Although Diageo will not reveal precise numbers, it said net sales of Guinness in the year ending June 30 were up 18 per cent in Nigeria. Strong growth across Africa helped to make up for a decline in Britain - still the stout's biggest market - and Ireland.
Guinness sales fell seven per cent in Ireland and the volume drunk fell by nine per cent. In Britain, sales fell four per cent as consumption dropped six per cent.
"Outside these two territories, Guinness is growing extremely well and that is the future of the brand," sa ys Diageo chief executive Paul Walsh. He attributes the surge in sales in Africa to a new television advertising campaign that promotes the drink as "the home of greatness".
So what is being done to promote the sale of Guinness in the UK and Ireland?
In the UK, following a successful three month trial in M&B pubs, Diageo is rolling out Guinness Red in a £2.5 million campaign across the central region. Guinness Red uses lightly roasted barley to create a substantial beer with a subtle red hue , and the company hopes to attract regular beer fans across the country.
Simon Garnett, senior innovation manager for Guinness Red, comments: "We are delighted with the results of the test, which emphatically show we have successfully recruited new drinkers to the Guinness brand. Guinness Red has all the hallmarks of the distinctive brand they love, but with a smoother, sweeter taste.
"People who usually only drink a few pints of Guinness a year, on events such as St Patrick's Day and when watching the rugby, now have another reason to choose Guinness more often."
And Diageo Ireland continues to develop a collection of limited edition stouts, the Guinness Brewhouse Series, which have been inspired by traditional stout recipes dating as far back as the 1700s and developed by the master brewers at Dublin's St James's Gate in an attempt to keep the market fresh.
In our tale of two brands only time will tell if it will turn out to be the age of wisdom for the marketing teams at Guinness and Magners or if it will be an age of foolishness.
----=== The Irish beer market ===Irish drinkers are the second highest consumers of beer in Europe, behind the Czech Republic with a per capita consumption of 187 litres and a total value of €3.2 billion, according to figures from the Irish Brewers Association.
However, pub sales of beer by volume are continuing to decline due to the combination of growing in-home consumption, the rising price of on-trade beer and the smoking ban , according to market researcher Mintel's Beer & Cider - Ireland April 2005 report.
In addition, Ireland was once the destination of choice for stag and hen parties from the UK, but it is now increasingly passed over in favour of cheaper eastern European destinations.
Faced with the combination of declining volume sales and the pressure of shareholder commitments, some brewers raised the average barrel prices of beer to gain back profitability.
"This placed further pressure on publicans, leading to some boycotting certain brewers and thus providing an opportunity for alternative and foreign brands," states Mintel. Savvy consumers now choose to drink more at home before they go out to a pub, combined with more casual beer drinking during the week. As a result, volume sales of beer from off-licences grew by a considerable 18 per cent, says Mintel.
Diageo is the clear leader in Ireland's alcoholic drinks market in terms of volume sales. Its leadership was attributable to a portfolio that includes illustrious international brands such as Smirnoff Red, Baileys Irish Cream, Smirnoff Ice and Guinness.
But rival Dutch brewer Heineken has reported a 0.7 per cent increase in turnover for its Irish business for the first half of 2007 - the highest beer market share gain of the main breweries - with the company now holding 21.6 per cent of market share in Ireland.
The company owns the Murphy's brewery in Cork, producing one of the biggest competitors to Guinness in the Irish stout stakes. Irish sales of all Heineken beer brands are up 2 per cent, with the company announcing an overall 24.8 per cent rise in its first-half operating profit for 2007.
Heineken Ireland reported turnover of €153 million, up 3 per cent on the previous year and in a briefing to analysts the company said Heineken was the fastest growing beer brand in the Republic of Ireland for the first half of 2007.
"The company's sales performance continues to benefit from the increased consumer preference for lager, particularly in the off-trade," the statement said.
According to the Irish Brewers Association, draught beer sales in Ireland have been falling consistently since 1999. While volumes sold at the pump have decreased, sales of beer at off-licences have been climbing ? up about 7 per cent ? as consumers switch to entertaining at home.
According to Euromonitor, total wine sales grew by six per cent in volume terms in 2005 - by far the largest growth sector in the overall Irish alcoholic drinks market. Cider/perry was the only other area with positive growth for both on and off-trade at 2 per cent but at a much lower rate, barely registering an increase on 2004.
Irish wine consumption, although the lowest in the EU, is rising dramatically.