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Marketing Management Essay

2058 words - 9 pages

1997 saw the US$19 billion merger of Guinness and Grand Met to form Diageo, the world’s largest drinks
company. Guinness was the group’s top- selling beverage after Smirnoff vodka, and the group’s third
most profitable brand, with an estimated global value of US$ 1.2 billion. More than 10 million glasses of
the world’s most popular stout were sold every day, predominantly in Guinness’ top markets: respectively,
the UK, Ireland, Nigeria, the USA and Cameroon.
However, the famous dark stout with the white, creamy head was causing some strategic concerns for
Diageo. In 1999, for the first time in the 241-year history of Guinness, sales fell. In early 2002 Diageo
CEO Paul Walsh announced ...view middle of the document...

However, the spectacular economic growth of the Irish economy since the mid-1990s had opened up the
traditional drinking market to new cultures and influences, and encouraged the travel-friendly Irish to try
other drinks. Beer and in particular stout were gradually losing popularity compared with wine or the
recently launched RTDs (ready-to-drinks) or FABs (flavored alcoholic beverages), which the younger
generation of drinkers considers trendier and ‘healthier. As a Euromonitor report explained:
Younger consumers consider dark beers and stout to be old fashioned drinks, with the perceived stout or
ale drinker being an old, slightly overweight man and thus not in tune with image conscious youth
culture.1
Beers sales, which once accounted for 75 per cent of all alcohol bought in Ireland, were expected to drop
to close to 50 per cent by 2006, while stout sales were forecast to decrease by 12 per cent between 2002
and 2006.
Giving Guinness a boost in its home market
With Guinness alone accounting for 37 per cent of Diageo’s volume in the market, Guinness/UDV Ireland
was one of the feel the pain caused by the declining popularity of beer and in particular stout. A
Euromonitor report in February 2002 explained how the profit of the Guinness drinker, typically men aged
21-plus, was affected:
The average age of Guinness drinkers is rising and this is bringing about the worrying fact that the
size of the Guinness target audience is falling. The rate of decline is likely to quicken as the number of less
brand loyal, non-stout drinking younger consumer’s increases.2
The report continued:
In Ireland, in particular base for Guinness is shrinking as the majority of 18 to 24 year olds
consistently reject stout as a product relevant to their generation, opting instead to consume lager or
spirits.
Effectively, one-third of young Irish men and half of young Irish woman had reportedly never tried
Guinness.3 A Guinness employee provided another explanation.
Guinness is similar to coffee in that when you’re young you drink it [coffee] with sugar, but when
you’re older you drink it without. It’s got a similar acquired taste and once you’re over the initial hurdle,
you’ll fall in love with it.4
In an attempt to lure young drinkers to the somewhat ‘acquired’ Guinness taste (40 per cent of the Irish
population was under the age of 24) Diageo had invested million in developing product innovations and
brand building in Ireland’s 10,000 pubs, clubs and supermarkets.
Product innovation
Until the mid-1990s most Guinness in Ireland was drunk in a paint glass in the local pub. The launch of
product innovations in the form of a new cooling mechanism for draft Guinness and the ‘widget’
technology applied to cans and bottles attempted to modernize the brand’s image and respond to
increasing competition from other local and imported stouts and lagers.
‘A perfect head canned Guinness
In 1989, and at a cost of more than 10 million, Guinness...

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