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INTERNATIONAL DRINKS GIANT Diageo has once again raised the price of its beer products.
It was confirmed this week that price increases by the London-based multinational company – which produces Guinness, Guinness 0.0, Hop House, Carlsberg, Harp, Rockshore and Smithwicks – will affect all of its on-trade beer products (those sold in pubs and restaurants).
Diageo announced that the change would add the equivalent of 6 cent to a pint and 9 cent a pint in the case of Guinness 0.0. A spokesperson put the increase down to “rising input costs”.
The Vintners Federation of Ireland (VFI), the industry body for publicans, described the increases as “a critical hit to an industry on the brink”.
It is the third time Diageo – which is also the world biggest spirits maker – has raised the cost of its beer products in Ireland in the last 14 months.
In January 2023, Diageo announced it would be adding 12c to the price of a pint, following a similar announcement by Heineken in November 2022. In July last year, Diageo announced a second 4c increase. But why is it doing this?
TheJournal spoke to publicans, representative groups, and industry experts to find out what’s behind the rising price of a pint (Diageo gave us a statement, but no one was available for interview).
While 22c over 14 months may not seem like a lot, these are increases to wholesale costs for publicans, who then decide whether to absorb the costs or pass them on the consumers.
Usually, wholesale price increases lead to greater increases “at the pump” as pubs say they must maintain the same profit margin. As well as increases in the price of their products, pubs and restaurants say the cost of energy, rent, wages, insurance and more have also risen over the last number of years.
This has led to the price of pints in Ireland shooting up.
According to Central Statistics Office (CSO) Consumer Price Index, the average cost across Ireland of a pint of stout was €5.64 in February this year, up from €5.40 the same time last year, and €4.90 the year before that. In February 2020, before the Covid-19 crisis, an average pint of stout cost €4.67.
A pint of lager, meanwhile, cost €6 in February, up from €5.88 in 2022 and €5.33 the previous year. Pre-Covid, the average cost was €5.06.
Of course, these are average prices. In some places you might get a pint for cheaper, in many places – like Temple Bar in Dublin – you will pay a lot more.
Publicans have said that the latest rise of 6c could see further “at the pump” increases of around 20c when they come into force in April.
As things stand, a publican pays €175.95 for a 50l keg of Guinness from Diageo. As of 15 April, this will rise to €181.23. There are about 88 pints in a keg, though some are inevitably lost due to waste and spillage.
Taking the new higher rate, the cost includes €133.87 base price and €47.36 excise duty. The Government charges excise on alcoholic drinks based on unit of alcohol.
This means that, including taxes, come April a pub will be buying a keg of Guinness at a cost of about €2.06 per pint (up from €2). The pub then adds its mark up and pays a further 23% VAT on pints sold.
So, for example, before the price increases, if a pub in Dublin now sells a pint of Guinness for €6, that means first the VAT is €1.12 (23% of 6 divided by 1.23)
€6 – €1.12 = €4.88
Of the remaining amount, €1.46 goes to Diageo:
€4.88 – €1.46 = €3.42
Then, there is the excise to subtract. According to the Government, the excise duty on a 4.3% ABV beer (like Guinness) is 54 cent.
€3.42 – €0.54 = €2.88
So the pub is left with €2.88 it earns per pint. However, this is before various overheads are subtracted, including staff costs, rent, insurance energy bills, upkeep, etc.
With the increased price, if a pub continued to charge €6 a pint, they would lose some of their profit.
In order to protect their profit margin, many pubs will factor in the additional cost, adding their margin and VAT, to be likely left charging a 15c-20c increase on top of what customers pay already.
The customer shoulders the loss again. But the VFI and many business owners say that margins are too tight already, and the rising cost of food and drink, along with everything else, are making businesses unviable with many having to close as a result (though energy costs and inflation have been dropping over the last year).
“This latest price hike is a blow they cannot afford,” said VFI CEO Pat Crotty.
A spokesperson for Diageo this week put the latest hike down to “rising input costs across our Irish business operations”.
“In order to offset this, we have advised our on-trade customers that there will be an increase to the list prices on our full draught product range,” they said.
In July, Diageo said the increase was due to “rising input costs across our business operations”, while in January last year it said “significant inflation in input costs across our operations” left the company with no choice but to raise prices.
“We have absorbed these costs for as long as possible but unfortunately, we can no longer continue to do so,” the company said at the time.
But what are these input costs? And are they really all going up?
Raw materials, staff and energy (how pints are made)
Diageo, like many businesses, has faced increased costs in areas like energy and raw materials, and the company said that it order to maintain a sustainable business it must raise its prices.
Diageo plc was formed in 1997 with the merger of Irish company Guinness and British group Grand Metropolitan. The international conglomerate is present in 180 countries and has offices in about 80 countries worldwide, employing about 30,000 people. While it has an Irish division (Diageo Ireland Unlimited Company), the parent company is headquartered in London.
The company famously brews its Guinness as well as some other beers at St James’ Gate Brewery, Dublin 8, first opened by Arthur Guinness in 1759.
When it comes to raw materials, beer has only four key ingredients: barley, hops, yeast and water. In tracking rising costs, barley and hops are the main ingredients to follow. Yeast is grown as part of the brewing process, and these days water is a relatively fixed cost.
In Guinness, barley is by far the most significant ingredient. Two types of barley are used in the process: roasted barley and malted barley.
Guinness gets its malted barley from Boormalt, a global malting company headquartered in Belgium (but with an Irish office in Athy).
The vast majority of malted barley used in Guinness is grown in Ireland, but Boormalt has many more international suppliers. Boormalt is owned by Axereal, a huge French agricultural and agri-food cooperative group.
It is believed that the Diageo works out the price it pays for malted barley with long-term contracts, with the prices varying depending on the wholesale price of grains (also known as cereals) in Europe.
The price of grains – which are known as commodities – has indeed risen in recent years as a result of drought and poor farming conditions, as well the ongoing war between Russia and Ukraine, which has severely impacted global supplies.
According to Eurostat, in 2022 the price of cereals – including barley – shot up significantly by an average of about 45% across the EU. However, last year prices significantly fell again, dropping by 26%, and continues to fall.
The price of hops – which is used in Guinness in much smaller quantities – has also been rising. Though these increases affect Guinness less than, say, higher end craft beers, as the hops used for Guinness are of a lower quality and not as expensive.
The key ingredient in hops is the alpha acid – the thing that gives beer its bitter taste. Scientists say that hop production in Europe and the levels of alpha acid in hops are both declining as a result of climate change.
In relation to energy – the other big input cost – electricity prices rose hugely in Ireland and across Europe in 2022, but have fallen significantly again in the last year. Staff costs – including the minimum wage – have also risen recently.
Input costs have risen, then, but up until this year so had Diageo’s profits.
In September last year, the company posted a 5% increase in its worldwide profits to £4.6 billion (€5.3 billion) for its 2023 financial year (which runs from July to June).
The company said at the time that “strategic price increases and productivity savings more than offset the absolute impact of cost inflation”, meaning that price hikes, among other measures, were greater than the impact of rising costs.
In 2022, the company had an operating profit of £4.4 billion (€4.13 billion), up 18.2% on the previous year, during the height of the Covid pandemic when sales in Ireland and the UK plummeted as a result of lockdowns. The company’s post-pandemic profits have exceeded pre-pandemic numbers.
Diageo had already weathered the storm of rising energy and barley costs in 2022 to post significant profits. The latest price increase in Ireland comes at a time when the price of barley and electricity has fallen significantly relative to 2022.
So why another increase?
One industry expert, with years of experience in the field (who didn’t want to be named), said that it “input costs” can potentially refer to many things.
“Energy and labour being are at least as significant if not more significant as raw materials,” they said.
But then you can look at investments. How much did they spend on capital expenditure?
In Ireland, Diageo plans to invest €200 million in a new carbon neutral brewery in Kildare. Last year, the company announced €25 million investment to ramp up production Guinness 0.0 at St James’ Gate.
“Are they input costs? Indirectly, yes they are,” the industry professional said.
Marketing also plays a significant role in Diageo’s business (all those great Guinness ads). In 2023, the company spent over £3 billion (€3.5 billion) on marketing worldwide, up from £2.72 billion (€3.17 billion) the previous year.
As well as all this, Guinness and beer drinkers in Ireland (and the UK) could be falling victim to their own love of pints.
Despite having posted good profits for their 2023 financial year, things have since taken a significant turn for Diageo.
The company’s longtime CEO Sir Ivan Menezes stepped down last year, and died in June after a short illness. The tenure of new CEO Debra Crew got off to a rough start as the company’s half-year result (from July to December) showed that profits had fallen by 11%.
The drop was due to a sharp decline of 23% in its Latin America business and a smaller drop in North America sales. The company is also suffering from suspending sales and winding down its business operations in Russia in 2022 after it invaded Ukraine.
This decline in profits has spooked investors.
However, in contrast, sales in Europe grew in the same period, and sales of Guinness in Britain and Ireland have skyrocketed since the end of the Covid-19 pandemic.
In the same period as the decline in the Americas, net sales in Ireland shot up by 10% “primarily driven by double-digit growth in Guinness and strong share gains in the on-trade”.
However, this time Diageo said that “strong strategic price increases were more than offset by cost inflation and increased marketing investment”.
In 2022, Guinness net sales grew by 20% in Britain and Ireland, as pubs and restaurants opened back up following pandemic lockdowns.
“The overall performance of Guinness post-pandemic has been exceptional,” the industry professional said.
Given years of decline, whilst it’s not in some dramatic growth curve, it’s certainly outperforming all expectations.
So, while Diageo is coming under pressure in other international markets, and has faced (now declining) inflationary pressures in terms of barley, hops, and energy, could anything else be at play?
“It’s a lot easier to take a price increase when things are going well than it is when you’re in trouble,” the professional said.
“And if they are under pressure in one market they will look to try to shore up profits in another.”
Despite Guinness being an iconic and longstanding brand that many people feel is synonymous with Ireland, at the end of the day Diageo is a massive multinational company pursuing profits.
Barley, hops, energy, international markets, currency exchange, capital expenditure, marketing costs, investor sentiment, the pursuit of profits and more all feed into the extra 20c you will pay for a pint next month (or the extra €1.20 you will pay for 6 pints).
Diageo and Heineken control much of the pub draft beer trade in Ireland, and Irish drinkers have seen significant price hikes from both in recent years. Publicans are worried that with ever-rising costs, more and more people will just decide to stay at home.
While this will be bad for them, it could also affect Diageo’s sales. Is the company shooting itself in the foot?
“The whole thing always comes back to consumer choice and the opportunity is there for people to choose other products,” the industry professional said.
Maybe they will. But the reality is that they haven’t in the past. And that’s what Diageo are betting on.
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Just stop all this already. Protect the vulnerable and open up EVERYTHING….this is gone beyond all human logic. Why are people allowing this anymore? Forcing perfectly healthy people to stay at home, not travel, not work, not go to school, not make a living, not see their families or friends. This has to stop NOW!
@Shnack: could die tho…
@Shnack: 100% the amount of jobs being lost at the moment & isn’t being reported. Why don’t the journal post daily job losses alongside the doom stats each day?
@Maalouf: probably not seeing as the death rate is so low…id rather take my chances because this is no life for anyone, cannot understand why people are still going along with this…its nuts
@Full Circle: ya exactly, where are the numbers of job losses? Suicides? How much more the country is in debt every day??????
@Shnack: The hysteria is actually getting worse if anything. The appetite for restrictions seems neverending
@Shnack: your probably right. It’s all too late. There is no point doing now what australia abs New Zealand has been doing for 12 months. You missed the boat and are swimming.
Home quarantine is a joke abs so is hotel quarantine unless you have a solider on each floor of the hotel. Melbourne learned this the hard way. And was locked down for two months due to and outbreak. Luckily it was contained and they are back to business as usual. Same as NSW who only locked down for about a week.
@Newto2016: yes the hysteria is worse now than it ever ever was, people cannot mentally take any more of this. People are turning against each other in droves. Fighting with everyone over absolutely everything, martyrs shaming people for wanting to open things up calling people murderers etc. This all has to stop. People’s mental health will not recover anymore, they will have nowhere to live anymore either when the money runs out.
@Shnack: That’s just the bl*e balls talking
@Kaya: that too lololol
@Shnack: stop making sense, there’s no place on here for that sort of talk. I would hope that the penny starts dropping for a lot of people soon. My boss only recently had an epiphany about how insane it is that there are zero supports for people where both parents are working and expected to homeschool as well. It’s just simply, suck it up and get on with it. Use your holiday time (since you’ve no right to look for time off anyway, sure where would you go?) or quit. Those are the two options that many people have been facing from the beginning.
The vitriol aimed towards anyone who dares have a dissenting opinion or questions the efficacy of the lockdown-reopen cycle is insane.
@Shnack: People are going along with it as the vaccine is just around the corner. We’d be opening up otherwise
@InvaderSkoodge: and I’m completely confident that any replies to this will be along the lines of “you’re lucky to have a job, you dont care if people die, you are just sick of looking at your kids, the vaccine is coming and everything will be sunshine and roses and NZ has zero covid” ad nauseam
@Shnack: how do you protect the vunerable? Leave them locked up in complete isolation?
If not then the risk still remains of someone who isnt classed as vunerable catching the virus in the community and giving it to the vunerable person. Obviously with everything opened up the virus will grow again, hospitals and ICU’s will fill up again and then f.a. has been achieved.
The economy will recover, people will gain employment and we’ll all be able to return to a proper way of living but now is not the time.
The UK tried to ignore the seriousness of the virus and hoped that deaths would not climb above 20k, they passed 100k deaths a few days ago. We are not equiped to have an open society while trying to control a pandemic at the same time, christmas just proved that.
@Steven Powell: We have open borders and are not allowed close them unless Unelected bureaucrats in Brussels give us permission.
@InvaderSkoodge: your boss is 100% right on that issue, my brother and his wife have 4 choosing kids. His wife is an essential worker and he is working from home on a hugely reduced wage and cam barely afford the mortgage anymore. All their savings is gone. They have 2 laptops between the whole family. He cannot homeschool them during the day, they are taking turns using the laptop. And when he ir his wife open their mouths about opening the schools they are accused of wanting to kill peoples grannies. Andolutely horrendous.
@Shnack: *schoolgoing kids
@Derek Lyster: sorry but they are already in complete isolation….along with the vast majority of the country in order to protect them
@Shnack: our hospitals are being overrun from what was a 2 week loosening of restrictions. What you are suggesting could literally take us to a societal collapse. I know two people in the past two weeks who have died after being taken to hospital for non covid related treatment – that in itself is a collapse of the system.
@Shnack: 90 dead yesterday. 54 dead today. All those families bereaved. And this is all you can say. Do you actually know tge meaning of community transmission?
@Derek Lyster: they are already in isolation, same as everyone else, how has that gone so far?
@Shnack: your are clearly panicking which is not a good way to make decisions.
@Lad: no I’m not actually, I’m one of the lucky ones who still has my job. I’m worried about everyone else.
@InvaderSkoodge: you called it! Here they all are lol
@Joe Griffin: yes I do, do you?
@Lad: i am sorry for your loss. Also, society has already collapsed incase you haven’t noticed.
@InvaderSkoodge: everyone else arent in isolation, we’re all restricting our movements and social contacts but we’re not in isolation.
@Shnack: Couldn’t agree more if I tried.
@Joe Griffin: How many deaths for other reasons? All deaths matter, well to most people anyway.
@Shnack: Thank you for writing this post it’s exactly as I see it now. So tired and fed up enough is enough wheres the plan after a year protect the vulnerable. Let the rest of us live roll out the vaccines. Today alone I went to the Dr to discuss how I was feeling and that I needed help i too am working full time and blessed for that.But others round me not so lucky and will only get worse…
@Shnack: I work in Covid HDU – you know who my patients are?
Old people, young people, pregnant women, people from nursing homes or with pre-existing conditions, people who ran marathons and were never sick a day in their life. People who had nothing in common except for the fact that they’re all now in very bad shape, struggling to breathe on ventilators, supplemental oxygen, steroids and antibiotics…basically I’m saying you literally don’t know what you’re talking about so STFU
@Lisa O Connor: I wish this reply was at the top. Youre not alone Lisa, myself and so many other I love are on emotional roller coasters. Ita just too much for so many people. Like you I’m lucky to have work too so I hate complaining at all because others are in worse situations but its knocking the soul out of me. I hope you have someone to turn to to relay how you feel. One person is all you need. But this country needs to have a complete change. There seems to be no plan in place, nobody has anything to look forward to and the ones who are lucky enough to work feel like whats the point? There is no let up. Life needs to go on. This is not life.
@SJF: just because I don’t work where you work does not mean a single thing! You are clearly out of touch with the majority of everyone else in the country suffering from the lockdowns. Have heard this story a million times from people like you and its a way to shut people up and accuse us of not caring about sick people in hospital. You might work there but you must not have any clue of economics, accounting, politics or even mental health training to dictate what opinions are valid and which are not. How dare you tell me to stfu, your opinion is no stronger or better than anyone else on this. If you’re looking for a medal for doing your job im sorry, I ran out very quickly last March.
@Shnack: the death rate is lower because of restrictions, it we opened up everything the death rate would be sky high. You only need to see how rampant the infection rate got after Christmas and it would keep getting worse and worse if left unchecked.
@Shnack: honestly this sounds like the opinion of a clown. I’m nearly in tears as is my father faceting last night as he hasn’t seen his newborn granddaughter in 6 weeks but lockdown and restrictions currently in place are keeping numbers low.
Countries like Norway daily talking about their numbers and how they can’t get as bad as Ireland is.
@Shnack: Are u for real ,so let everyone die is that your logic Do u think the Government & NPHET are doing this just to keep us all locked up ,
@Shnack:
“You might work there but you must not have any clue of economics, accounting, politics or even mental health training to dictate what opinions are valid and which are not”
Oh, so you’re an economist, mental health professional, politician and account now are you? You must be, or by your own logic you’re not sufficiently qualified to weigh in on those topics and thus decide whether or not I have any knowledge regarding them – bit of a catch-22 eh?
“Have heard this story a million times from people like you and its a way to shut people up and accuse us of not caring about sick people in hospital”
Nope, personally couldn’t give a damn whether or not you care about anything but if it will shut you up advocating “herd immunity” (which has been emphatically proven to be an abysmal failure) then hey, I’m all for it.
Whether or not you care about sick people in hospital is irrelevant – you obviously have no interest in preventing people from getting sick and ending in hospital in the first place because you’re happy to roll the dice with other people’s lives.
Something about your wording suggests to me that you consider yourself one of those “perfectly healthy” people you mention and my point was (because clearly you didn’t get it) that this virus is unpredictable and unlike a flu or cold those who end up having no symptoms or those who end up going off a cliff with it is no sure thing.
And yes, I have watched people die almost EVERY DAMN DAY since Christmas, I’ve had to call families and tell them their “perfectly healthy” relatives are now palliative and they better come in quick to say their goodbyes…and then I come home after working 13 hours in a row without a break – not even for lunch- and read this sh!t from someone who judging by their comments just doesn’t get it, who CANNOT apparently grasp just how bad this is getting, just how bad things are, and accuses me of wanting a medal? How dare YOU.
And yes, if your opinion is to open up EVERYTHING then yes, my opinion is subjectively more valid.
You want me to play devils advocate? Debate you? Agree to disagree or accept your opinion as “equally valid” sorry, ran out of effs to give very quickly in March.
@SJF: hear hear. Thank your for everything you are doing
@SJF: Well said and thank you for all you and your colleagues are doing. this @scnack person is a plonker. him and his like are the reason you are so busy and the system is collapsing. What an absolute prizeClown he or she is.
@Shnack: you’re worried about yourself end of. And your selfishness is blatant. Thank christ I am not a friend or family of yours, you wouldn’t be one to rely on. I agree with SJF, you haven’t a clue and echo his sentiment, STFU!! 1D1OT
@SJF: I think I read to line 6 on this…zzzzzz
@Shnack: Suicides rate is down by 6%, presumably you will be against reversing the lock down as it will increase the suicide rate and you are an active campaigner for better mental health facilities.
I doubt it.
@ChronicAnxiety: get a life
@Shnack: totally ignorant reply She is telling you the truth but u dont want to hear it pity u can’t see it first hand by visiting ICU or talk to the many families who have lost loved ones U don’t seem to care once u can get back to your full life & to hell with the conquences Yes people are having a very hard time money wise Being restricted & mental Health l issues but they still would not want to lose a loved one Do u think its only in this country this is happening & rhe Governments are closing up everything for fun
@SJF: Have a couple of (genuine) questions: When you say you want to shut up people arguing “herd immunity”, I presume you mean the strategy and not the concept, right? Of those people you mention above (Old people, young people, pregnant women, people from nursing homes or with pre-existing conditions, people who ran marathons and were never sick a day in their life), what’s the percentage of each? Are you seeing more of one group than others, or a pretty even mix?
The disorganised manner of this government is beyond belief..
@Manni: and as part of the EU, the EU are screaming for the Oxford vaccine that they haven’t even approved yet. It was made in the UK: they paid millions developing it, they put their order in three months before the EU and yet the EU are demanding that they send it to us and behaving like spoilt children at this moment in time. Seriously when are we going to open up our eyes to the bureaucracy sh** that we have to put up with from the EU
@Carol Cunningham: bet there are a lot of covid fascists who do not like hearing that. Their wonderful government shutting everything down for as long as possible and obeying the EU to the T
@Manni: the people voted them in it will never change
@Carol Cunningham: Will you grow the f up?? The EU front ended billions to AZ, invested much more than the UK on this very vaccine the Brits love boasting about, half of the breakthrough at Oxford came from Irish scientists and AZ is half swedish yet the arrogant English think it is them who are solely responsible for this vaccine
FYI AZ signed a contract with the EU, committed to quarterly deliveries which needs to be honoured by AZ, you probably dont understand contract law very well but others do and it doesnt work on a first come first served basis as most simpletons would believe with contracts.
The EU isnt behaving like a spoiled child but is rightfully demanding a contract is upheld and a return on it’s up front investment.
Simple low cost solution is No negative test proof. No boarding plane or Ferry to Ireland. Big fines for airlines who do not cooperate.
@Ger O’Reilly: no political will to legislate this.
I really don’t understand the vitriol for people flying. It was only a few weeks ago that Ireland had one of the highest rates of covid in the world. I’d have preferred being in close contact with an airline passenger with a negative pcr test than Dave down the road picking his nose in tesco. People are jumping on the New Zealand bandwagon without realising that Ireland is not the same. Just because you fly to Spain, does not mean you automatically get covid. You can act responsibly wherever you are.
Can they not all just get a test before they leave their country. Easy as …..
Pure activism …. Europe should be protected from Irish travelling outside Ireland since the new mutation is especially viral here and in the UK. I don’t see a problem people arriving from Germany for example, a country with a lesser Covid rate, holding a negative pcr test in their hands. And Ireland is so rural….. why do they need to stay in their room?? Why can’t they go fishing for example? Outdoors on your own doesn’t spread any Corona!!! We need more common sense and protect the vulnerable and frontline staff with intelligent measures
‘Quarantine’ in the home is not quarantine. A person or group must be in self contained isolation, including toilet bathroom and food preparation. Call it something else if it’s in a home in a society.
Borders and airports need to be closed, it should have happened a long time ago seen as the couldn’t be bothered testing people.
So its ok to fly from SA to London and change plane for a flight to Dublin and self isolate.
@David Connell: no, London will now enforce 14 day mandatory quarantine in an airport hotel. With guards, police and big fences. Uk had become like Australia in last few days.
Still flights arriving from Portugal and by extension Brazil. UK have banned flights from Portugal as have many EU countries.
SHAMBLES.
Send them to Galway
@Full Circle: send the British to Rathkeale… it’s full of UK reg cars so they will feel right at home.. and shebeens are open so they can get a drink too
@Kevin50: any idea what to do with brazilians…?
@Marcin Goralski: see full circles answer
@Kevin50: thanks for the tip!
I heard rumours of dodgy delboy (birtie) are floating around trying to get back in. I’m sure he could show mehole how to handle this crisis
Jesus wept, confusion reigns!!!
The do-what-you-like model, as practised in Brazil, would result in the complete collapse of civil society with deaths on a scale not known in this country since the 1840s.
Schnack and his fellow panickers have no solution. Putting your hands over your ears and humming is not a solution.
The government won’t inforce anything for another few weeks. Because they want to go on their jollys St Patrick’s weeks. And tell the rest of us they went for the good of the country
have your say