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Guinness maker's poor sales echo worldwide trend

GLOBAL drinks company Diageo, the makers of Guinness, said yesterday that it suffered poorer sales results than expected for the first three months of 2013.

The company's financial results echo the poor outlook for the drinks sector in Ireland, where alcohol sales in pubs fell by 6pc last year.

But the importance of Ireland's drinks industry to the overall economy should not be underestimated.

Research by the Drinks Industry Group of Ireland (DIGI) says that the sale of alcohol in Ireland contributes €2.8bn to the economy through business running costs such as raw materials and wages, and employs 62,000 people.

It pays out €1bn a year, DIGI says, towards wages and personnel costs. Yet the industry is clearly hurting. Alcohol sales in pubs are down 33pc in five years.

Still, the drinks sector generates over €1bn in export sales annually – as much as the country's dairy industry – and €1.8bn in tax revenue through VAT and excise duties.

These taxes are controversial. Early last year the Government increased VAT from 21pc to 23pc and Budget 2013 increased excise duties substantially. Beer excise was raised by 22pc, spirits by 18pc and wine by a massive 41pc. Irish-bought wine is now subject to heavier excise duties than anywhere else in Europe.

This is roundly criticised by drink sellers. Many chose to absorb these excise increases themselves rather than pass them on to customers through price hikes, to try and save falling sales. DIGI is calling on the Government to begin to reverse the tax increases.

As a results of narrowing profit margins and falling sales, 6,000 jobs have been lost since 2009.

Donall O'Keeffe, CEO of the Licensed Vintners Association, says falling sales mean pubs are forced to change their business models by cutting working hours and hiring part-time staff where they would have previously hired full-time.

He says many pubs are family owned and it is incredibly difficult to let go or reduce the hours of loyal staff from local communities.

Diageo's results illustrate that alcohol sales are not just challenged in Ireland – the trend is evident worldwide. The global drinks company, which makes Baileys and Johnnie Walker whiskey as well as Guinness, said sales growth was 4pc, lower than expected by analysts.

Sales fell in emerging markets such as Brazil, Nigeria and South Korea.

Not all brewers reported less than positive results. UK manufacturer SABMiller had some bright spots, including parts of Africa and also eastern Europe, where new premium product launches helped boost sales.

France's Remy Cointreau bucked the gloomy trend, with solid China New Year cognac sales and a sales increase in Russia and Britain.

Irish Independent