Diageo to shut breweries in Kilkenny, Dundalk

Diageo is to close its breweries at Kilkenny and Dundalk, significantly reduce its brewing capacity at St James's Gate and build a new brewery on the outskirts of Dublin under a plan announced today.

The company said it would invest €650 million (£520 million) between 2009 and 2013 in the restructuring.

The renovation of the St James's Gate brewing operations is expected to cost around €70 million and will see the volume of Guinness brewed there fall from around one billion pints a year, to just over 500 million.

This plant will serve the Irish and British markets and will be based on the Thomas St side of the site. The company said this would ensure that every pint of Guinness sold in Ireland would be brewed here. Approximately half of the 55 acre site will then be sold once the five-year project is complete.

Around 65 staff will remain in brewing operations at St James's Gate with about 100 others due to transfer to the new Dublin plant.

Although the company has yet to announce the exact location of its new brewery, the company says it will have a capacity of around nine million hectolitres, or around three times that of the refurbished St James's Gate site. This new brewery will produce Guinness for export and ales and lagers for the Irish market.

Diageo said when the two Dublin breweries are fully operational in five years time it will transfer brewing out of the Kilkenny and Dundalk breweries and close these plants. This move will result in “a net reduction in staff of around 250”, the company said.

The company employs 800 people in its brewing operation and a total of 2,500 in the Republic and Northern Ireland.

Diageo said these two plants "do not have the scale necessary for sustained success in increasingly competitive market conditions".

The company said it would offer those employees relocation opportunities where possible. Those for whom relocation is not possible will be offered "a severance package alongside career counselling".

Operations at its Waterford brewery will be "streamlined" as part of the re-organisation leading to "some reduction in output". the current workforce of 27 in Waterford would be reduced to “around 18” but Diageo was unable to confirm the extent of the output reduction.

The company says the St James's Gate site it proposes to sell and the Kilkenny and Dundalk sites have an estimated value of €510 million.

The Guinness Storehouse, which receives around 900,000 visitors a year, will continue to be based at St. James's Gate.

The company estimates it will incur one-off costs of €152 million during the restructuring and says this would be treated as an exceptional cost in the fiscal year ending in June 2008.

Paul Walsh, chief executive of Diageo said: "Over the last twelve months we have conducted a rigorous review of our brewing operations in Ireland. It examined many options and I believe it has identified the right formula for the long-term success of our business in Ireland and for the continued global success of the Guinness brand."

"Our ambition is to combine the most modern brewing standards with almost 300 years of brewing tradition, craft and heritage."

Guinness has been brewed at St James's Gate for almost 250 years. Guinness extract produced at the Dublin site is exported to more than 45 countries.

The site covers 55 acres and houses the seven-storey visitor center and bar. Sales of Guinness in Ireland fell seven per cent in the last fiscal year, and Nigeria has overtaken Ireland as the drink's second-biggest market, after the UK.

Last August Mr Walsh admitted that markets outside of Ireland and Britan are the future of the product.