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Guinness “ Dealing With A Shift In Consumer Trends” Tom Muldowney X00039338 5 th May 2009

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Brief History <ul><li>1759 – Arthur Guinness set up Guinness at St. James’s Gate Dublin </li></ul><ul><li>1769 – Guinness sent to England </li></ul><ul><li>1820 – Guinness sent to the Caribbean and Africa </li></ul><ul><li>1840 – Guinness is sent to America </li></ul><ul><li>1883 – St James’s Gate became largest brewery in world </li></ul><ul><li>1885 – Guinness producing 1.2m barrels per annum </li></ul><ul><li>1886 – Guinness became a public company </li></ul><ul><li>1914 – Guinness producing 3m barrels per annum and employs 4,000 </li></ul><ul><li>1997 – Guinness and Grand Met merge to become Diageo </li></ul><ul><li>2000 – Guinness Storehouse is established </li></ul><ul><li>2009 – 10m pints of Guinness are enjoyed every day around the world </li></ul>

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Alcohol Industry Today <ul><li>Most lucrative & high performing industry in Ireland - €7b revenue annually and employs over 100,000 people </li></ul><ul><li>Since 2001, industry is suffering from withdrawal, especially the public house sector – in particular the beer category due to rise in wine and spirit consumption </li></ul><ul><li>Guinness depentent on public house sales – 90% consumed in pubs </li></ul><ul><li>2008 saw a 6% drop in sales of alcohol in Ireland </li></ul><ul><li>Change within Irish society seen with the fact that in 2001, 70% of alcohol was purchased in pubs and in 2008, it was only 51% </li></ul>

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Competition Breakdown <ul><li>Alcohol industry in Ireland consists of 4 categories – Beer & Stout, Spirits, Cider & Wine </li></ul><ul><li>Guinness faces competition from other stouts include Beamish, Murphy’s and other lesser known brands of stout </li></ul><ul><li>Guinness - 85.1%, Beamish - 8.5%, Murphy’s - 5%, Others - 1.4% </li></ul><ul><li>In 2008 – all categories experienced decline in volume consumed </li></ul><ul><li>Industy is worth over €7b annually – highly competitive </li></ul><ul><li>Also competing for “share of pocket” – consumers have more choice on how to spend their income – pubs, cinema, gym, sports etc. </li></ul>

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Competition Breakdown

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Key Issues <ul><li>Smoking Ban </li></ul><ul><ul><li>Introduced to Ireland at the end of March 2004 </li></ul></ul><ul><ul><li>Smoking now illegal in the workplace – including pubs & restaurants </li></ul></ul><ul><ul><li>Sales of Guinness dropped by 6% at the end of that year alone </li></ul></ul><ul><ul><li>Resulted in the closure of hundreds of small rural pubs </li></ul></ul><ul><ul><li>Resulted in 440 fewer licence renewals the following year </li></ul></ul>

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Key Issues <ul><li>Driving Laws </li></ul><ul><ul><li>Considered the ‘norm’ in some rural areas to drink and drive </li></ul></ul><ul><ul><li>Since late 1990’s – stricter laws on drink-driving – fines, bans and jail sentences </li></ul></ul><ul><ul><li>People becoming scared to drink and drive now due to punishments and opting to stay at home and drink instead </li></ul></ul><ul><ul><li>Coincided with drop in Guinness sales in Ireland </li></ul></ul>

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<ul><li>Off-Licence Sales </li></ul><ul><ul><li>‘ Cocooning’ – Social trend on the rise – staying in and drinking </li></ul></ul><ul><ul><li>Consumers felt they saved a lot of money by avoiding the pub before going out </li></ul></ul><ul><ul><li>Rise in amount of off-licence premises opening while amount of pub closures increasing also </li></ul></ul><ul><ul><li>Off-licence sales began to steadily rise – 12% annually </li></ul></ul><ul><ul><li>Pub sales however began to steadily fall – 5% annually </li></ul></ul>Key Issues

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Key Issues <ul><li>Rise in Wine Consumption </li></ul><ul><ul><li>1950 – 200,000 cases sold in Ireland </li></ul></ul><ul><ul><li>1980 – Figure had tripled to 600,000 </li></ul></ul><ul><ul><li>1990 – Figure had triples again to 1.8m </li></ul></ul><ul><ul><li>2002 – Figure had tripled once again to 5.4m </li></ul></ul><ul><ul><li>2007 – 8.7m cases of wine now being sold </li></ul></ul><ul><ul><li>More ‘sophisticated’ consumer emerging </li></ul></ul>

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Tackling These Issues <ul><li>18-35 year olds switching to lagers and spirits on nights out - Guinness needed to re-evaluate their product positioning </li></ul><ul><li>Series of new adverts - Guinness began heavily advertising their canned products with a range of quirky and visually stunning campaigns - attract the younger generation </li></ul><ul><li>Guinness Storehouse opened in 2000 – Helped reconnect with the younger market and breathe a new lease of life into the aging brand – welcomed over 4m people through it’s doors to date </li></ul><ul><li>Sponsorship – Guinness Rugby Premier League, Rugby World Cup, Lions Tour 2009, African Nations Cup 2008, GAA All-Ireland Hurling Championship </li></ul><ul><li>Music & Arts festivals – Guinness Cork Jazz Festival, Guinness Feile na nDeise Festival and Guinness Witness Festival </li></ul>

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Key Learnings <ul><li>Guinness is the best known of all consumer goods in Ireland </li></ul><ul><li>Ireland, UK and US account for over 60% of all sales – have all experienced decrease in sales over the years </li></ul><ul><li>Future may lie abroad – African Market experiencing rapid yearly growth – 17% increase from last year </li></ul><ul><li>Penetrating markets such as Russia, China, India and Korea – important for future growth </li></ul>

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Key Learnings <ul><li>Guinness need to try harder to connect with the younger market – advertising, sponsorship and promotion can play a key role </li></ul><ul><li>Guinness Storehouse – important for the Irish market – keep Irish consumers interested in the brand and attract the younger consumer </li></ul><ul><li>Comfortably ahead of other stouts in terms of marketshare and performance – major threats coming from spirits, beers and wines </li></ul><ul><li>Recent sales figures for Guinness in Ireland have shown a 2% increase for 2009 – perhaps marketing campaigns are beginning to succeed or it could be possibly credited to the increase in unemployment – cheaper option and more people in the pub during the day </li></ul>

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<ul><li>Thank You Very Much </li></ul><ul><li>Any Questions? </li></ul>