Diageo rules out Guinness sale

Paul Walsh, chief executive of Diageo, yesterday ruled out selling off Guinness, saying the group would expand sales of the stout in Africa to counter declines at home.

Mr Walsh said a continuing fall in Guinness sales in the Republic had "nothing to do" with Diageo's marketing of the brand, and was instead due to "structural" changes in consumption as people spend less time in pubs.

"We have to continue to grow the brand outside its home market," Mr Walsh said, adding sales of Guinness outside the Republic have been rising by 4-5 per cent.

The comments may dampen speculation that Diageo has been considering selling Guinness.

Sales of the stout have been falling for years, declining by 7 per cent across Europe in the last six months of 2006.

Last month, the group began a review of its Irish operations, but says no decision has been made on the possible sale of the St James's Gate premises in Dublin.

Property experts suggest the 68-acre site could be worth up to €1 billion if the company moved out.

Yesterday, Mr Walsh also played down suggestions the group would buy an important beer brand. It was reported in April that Diageo had considered buying brewer Scottish & Newcastle with SABMiller.

He said to make good acquisitions in beer was tougher than to do so in spirits, given that many brands struggle in their domestic markets as consumption in western markets declines. "Acquiring an out-and-out beer brand is going to be difficult."

Diageo's near-term acquisition goal is Absolut, the Swedish vodka brand owned by Vin & Sprit (V&S).

Mr Walsh said the Swedish government was in process of distributing an offering memorandum for V&S as it moves towards privatising acts to privatise the company. He expects a formal process in September: "We will be looking to participate in that process."

Diageo remained hopeful the government will put Absolut up for sale, but Mr Walsh cautioned it could also "trade off some value" by floating the group rather than by selling it, to keep the brand under Swedish ownership.

"You could see how an initial public offering would be very attractive from a political level."