Smirnoff and Johnnie Walker may make Diageo more money, but there is no more iconic brand in its portfolio than Guinness. Nevertheless, speculation continues that Diageo may sell off its main beer brand. In this month's Just the Answer interview, Brian Duffy, global brand director for Guinness, addresses that question, while also discussing Guinness's progress in Africa where it was recently hit by a counterfeiting scam, the development of off-trade sales and product innovation.

J-D: Speculation has risen recently that Diageo may sell its St James' Gate Guinness facility in central Dublin. What is the likelihood of this going through in the near future?
 
Duffy: The property market in Dublin has been on a significant upward trend of late - so talk is cheap and property is dear in Dublin. We have a brewing review in place at the moment in Ireland, and this review is exactly that - it's a review. We're planning to make a significant investment of over GBP100m (US$205m) in our brewing assets, and we're looking at the best way to do that. It's not like we've suddenly realised we've got some valuable property.

J-D: How successful was the transfer of Guinness production for the UK and Ireland to Dublin?

Duffy: It's been very successful. It was a move precipitated by the opportunity to reinvest, and the best way to do that was to reinvest in St James' Gate. It's led to an increase in capacity of about 50% at St James' Gate and that's gone very successfully. Also, from a provenance point of view, that all the Guinness for Britain is now brewed in Dublin has been a positive. There is the possibility of increasing capacity at St James' Gate.

J-D: Turning to Africa - which makes up around 35% of global Guinness sales - how has the market there grown and how is it shaping up for the future?

Duffy: The growth in Africa is coming not only from existing and well-established markets, but also from the opening of some new markets. Organisational focus has been a priority in the region, but we have also been active with marketing in the continent. We work very hard on the quality of our product, service to customers, visibility in market and our above-the line communications.

J-D: How big a concern is the recent counterfeiting situation in Nigeria?

Duffy: Counterfeiting is a global phenomenon, in terms of admired, premium brands being counterfeited. We always work hard to prevent that by working with local authorities. I don't regard the Nigerian thing as particularly huge. It reflects our continued focus on making sure such things don't happen.

We have 75m bottles circulating in Nigeria, and we continue to make sure that the consumer gets the right thing.

J-D: How about in the US?  The imported beer segment is the main growth area for beer overall. How is Guinness performing there?

Duffy: We've been in the US for a long time, but we still have a considerable distance to go in terms of distribution. The other big challenge is to move Guinness into a more regular consumption item. Clearly we have key periods like Christmas and St Patrick's Day, but we're looking to offer consumers different formats of Guinness and to promote it at different times. So, it's a successful business there, but we've got bags of potential in the US.

We've got some new above-the-line communications coming out shortly in the US, and we're very committed to the US.

Brian Duffy, global brand director of Guinness for Diageo

J-D: The UK and Ireland makes up the lion's share of sales for the brand - about 40%. But there seem to have been several hurdles placed in your way in these markets. How would you assess your current position there?

Duffy: They're very important markets for us, certainly. The biggest concern at the moment is how the smoking ban affects the on-trade in England. We're strong in the on-trade, so let's wait and see. I think the trade is ready for it. Despite Ireland being a small market - only 5m people live there - it's the spiritual home of Guinness and it's very valuable to us. We're going to continue to invest in the market, which is shifting markedly from on-trade to off-trade. At the moment, we're twice the size of our nearest competitor, so we're big.

J-D: How difficult is it to innovate a brand with such a strong legacy base?

Duffy: I think innovation has to be rooted in the brand truths. Simply applying the name Guinness to something will lend it a certain kudos, but for long-term success, innovations need to be very rooted in these brand truths. We need to build from there, that's the key.

We're encouraged by the testing of Guinness Red in Great Britain over the last six months, for example. We're at the decision point about where to take it next, but we're not going to rush it. I wouldn't represent Guinness Red as a blockbuster innovation headline - we continue to develop and understand it, and we're optimistic.

J-D: Guinness is significantly skewed towards the on-trade. How do you market Guinness in markets where the off-trade is eating into the on-trade?

Duffy: It's about giving the consumer the experience he wants at home. In Ireland, we're growing in the off-trade, with Guinness draught in can contributing mainly to that. We believe that with the right marketing and execution, we can be very successful in the off-trade. We do that in different markets around the world. In the US, for example, we're exceptionally successful in the off-trade, so it's about creating a more balanced performance between the two channels.

J-D: How interested is Diageo in being involved in the ongoing consolidation within the global brewing industry?

Duffy: Diageo is always looking at opportunities to consolidate and grow its position. One of the areas we definitely want to develop is our position as a leading beer player. That means looking at acquisitions, joint ventures and opportunities as and when they're available and we continue to do that. But we're ambitious in total beverage alcohol.

J-D: Have you been talking to Scottish & Newcastle?

I think my earlier comments cover all that - we're continually looking at opportunities.

J-D: Why is it that rumours about Diageo selling Guinness won't go away?

Duffy: It's almost like the weather and taxes, it's always with you. Guinness is an iconic brand; it's exceptionally well-known and admired around the world. It's also a people's brand as well, which is of interest beyond the corporate level of interest - it connects with the consumer. It's popular, it's high-profile, it's well-loved and it's talked about a lot - a bit like Manchester United!

We don't want to sell it - the speculation comes from where it comes from, but it doesn't come from us, it comes from outside. Interest in our brand is great, and reflects its standing. The rumours, however, are simply rumours and they're not based on fact.