Diageo is to invest EUR650m (US$1bn) in its brewery infrastructure in Ireland, including the building of what will be its largest brewery. However, the company also said it would be closing two other breweries as a result.

The new proposals, which the brewer says are necessary to "deliver the global competitiveness necessary for future growth and sustained success," will involve the upgrading and consolidation of the St James's Gate brewery to produce Guinness primarily for the Irish and British markets.

Meanwhile, a new "state of the art" brewery will be built to produce Guinness, ales and lagers, the location of which is yet to be announced. The company said it will produce Guinness to meet growing export demand.

Upon commission of the new brewery in 2013, all production from existing breweries in Kilkenny and Dundalk will be transferred, resulting in the closure of the two facilities and loss of 250 jobs.

Although having both played a "critical" role in the historic success of Diageo's beer brands in Ireland, the brewer said they do not have the scale necessary for sustained success in "increasingly competitive market conditions" and are not a suitable size for the new brewing operation.

Operations at Diageo's Waterford brewery will also be "streamlined" as part of the re-organisation.

"I want to fully acknowledge the huge role and heritage of the Kilkenny and Dundalk breweries, which would cease operations once the new brewery is fully commissioned," said Paul Walsh, chief executive of Diageo. "I believe that the lessons and experience we draw from their valuable tradition and heritage can only help to enrich our new brewery."

Following the completion and commissioning of the new breweries, surplus land on parts of the St James's Gate site and in Dundalk and Kilkenny will be available for redevelopment and is estimated to have a value of approximately EUR500m.

The "rejuvenation" of the St James's Gate brewery will mean the Guinness Storehouse will continue its development programme to accommodate growing visitor numbers.

"This proposal will support the long-term success and growth of Guinness around the world, as well as the other beers we brew for Ireland, Great Britain and international markets," said Walsh. "Our ambition is to create a brewing hub, which will meet the highest standards of technology, efficiency and environmental management."

The company said it will now engage in formal consultation with employees on the implementation of the proposal.