Brewing boost for Guinness

GUINNESS Ireland expects to meet its sales and profit targets this first year following a good half, according to managing director Mr Colin Storm. The company made a significant contribution to the strong first-half performance of the brewing division of the Guinness group, he said.

Results from the British brewing and spirits group, Guinness plc, were ahead of expectations. Pre-tax profits rose by 5 per cent to £357 million sterling for the six months to the end of June.

Expectations had been in a £337 million to £353 million range. The group declared an interim dividend of 4.55p a share, up from 4.2p.

But chairman, Mr Tony Greener said markets in Europe were tough and not expected to improve this year. Guinness shares fell 6p to 448 1/2p as doubts rose about the company's spirits sales - Scotch whisky sales were 4 per cent lower at 10.2 million cases.

No profit figures were given for the Irish operation. The brewing arm of the group, which includes Guinness Ireland, recorded a 5 per cent rise in profits to £119 million sterling.

Sales growth at Guinness Ireland was ahead of growth levels in the strong Irish beer market. The performance was boosted by strong export sales with a 12 per cent rise in export volumes which account for 40 per cent of total sales. Sales in the Irish market rose by 7 per cent against an overall market increase of 5 per cent.

The development of Irish pubs around the world accounted for some of the rise in export sales.

Guinness stout and Harp lager showed strong growth in the US, where the volume of draught Guinness sold rose by 30 per cent. There was "healthy growth" in emerging markets such as South Africa, Mr Storm said.

Within Guinness Ireland, all the brands performed well, he said. Two of the larger brands Budweiser and Carlsberg recorded double digit percentage growth, Guinness stout outperformed the market and Harp Celebration "held its position very well".

Guinness Ireland launched its first cider backed by a £6 million marketing budget and sales are ahead of target. Kilkenny Irish Beer, launched in Ireland in mid-1995, exceeded Irish sales targets and showed strong growth in export markets, particularly in Britain.

Guinness Ireland will spend about £40 million on capital projects this year, including the provision of two new keg lines at the St James's Gate Brewery in Dublin at a cost of £14 million.

For the group, the spirits market was difficult. "The future of the business lies in brands and building brands," Mr Greener said. At United Distillers, the spirits arm, the group will spend 20 per cent more this year on brand promotion. It spent about £300 million last year on spirits marketing.

"We are not only putting the total amount of money up but we are switching money in the mix to focus on brand building (media advertising) activities and taking it away from price promotion and price volume support," Mr Greener said. The group was taking a "very tough line" by cutting back on price promotions and investing more heavily in brands like Bell's, Mr Greener added.

Profits from spirits sales in Britain fell £4 million to £16 million and fell by £10 million to £59 million in North America.