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Manchester, United Kingdom
Tyson is a beer hound and cheese addict living in the beery metropolis paradise known as Manchester
If the people are buying tears, I'll be rich someday, Ma

Sunday, 11 July 2010

Guinnes Was Good For You

Hot on the heels of news of the Guinness Surger comes the revelation that the brand itself is in decline. Seven million pints less of the black stuff were sold in the UK last year. That’s a fall of some 2% of sales by volume compared to the previous 12 months.

Nor does it seem that this is merely a blip. According to the market research company Mintel, sales of Guinness have dropped by £28.5M over the last three years. That’s not loose change even to a behemoth the size of Diageo. Particularly considering the amount of money they spend advertising the stuff. It accounts for an eye-watering 54% of all advertising revenue in the ale and stout category.

Taking all this into account, it’s no wonder that Diageo have resorted to “diversifying”. Desperation others might call it. Hence Guinness Lager, Guinness Mid-Strength etc. Zak Avery has written an entertaining, if rather sentimental, piece about it. Iconic it may well be, but “tasting pretty good,” is a debatable point. And, as others have pointed out, it’s actually more of a distress purchase than a trusted friend in some pubs.

The reasons for its decline seem obvious to me. Although there have been changes to our drinking habits, these have been maturing longer than three years. And neither do I think that the increased sales of alcopops or the resurgence of real ale are to blame. The alcopop (RTDs) drinker was never going to be a big Guinness consumer and the real ale drinker often still turns to Guinness when circumstance demands.

No, the reasons for Guinness’s current predicament are rather more fundamental, I would argue. They are simply victims of the universal law of supply and demand. Having hit saturation point in a declining market, they are now on the down curve.

Any microeconomist will tell you that as prices rises, supply falls. This seems to hold true in every field. Indeed, I was reading some research by behavioural economists that seems to indicate that even sexual preference may react to the law of supply and demand. But that’s a subject for another post.

The simple fact is that with Guinness now averaging £2.94 a pint and lacking any innovation-its Extra Cold brand is ten years old; its hit an economic brick wall. Diageo have heavily milked it and overpriced it for far too long. No amount of cost cutting, brewery closures and brand diversification can hide the fact.

Good things do indeed come to those who wait...

1 comment:

Tandleman said...

Excellent piece and I agree with most points you make. Also as the blandness increases, why pay the extra for Guinness? After all you can by something designed that way from the start, or increasingly for the same price, a quality imported beer or lager.

Guinness is in a hard place.