Diageo is to review plans to build a EUR650m (US$843m) Guinness brewery in Ireland, due to the global economic downturn.

Diageo said yesterday (19 January) that the plan has been put on hold pending a re-evaluation of the market, expected to take several months.

Plans to build a new "brewing hub" on the outskirts of Dublin were announced in May last year. Under the initiative, both the Kilkenny and Dundalk breweries were to be closed, with production at the Waterford brewery also cut, once the new facility opened in 2013. Up to 250 job losses were anticipated.

Diageo said yesterday, however: "Diageo has decided to conduct a re-evaluation of this brewing investment programme in order to ensure its scope remains appropriate in the changed economic environment."

A decline in Ireland's property and land prices, echoing a similar downturn in the UK, may have contributed to Diageo's decision to review the move.
The group had hoped to recoup EUR500m of its investment via the sale of the Dundalk and Kilkenny breweries. Property prices in Ireland have slumped in the last 12 months, however, with sales falling from EUR2bn to just EUR300m, according to a survey by the Irish Auctioneers and Valuers Institute, released last week.

A weakening global economy has also impacted beer sales in key markets, particularly in the UK and Ireland, where a drop in consumer spending power has accentuated the plight of the pub and bar sector.

One option for Diageo may be to scale down its planned investment.

The drinks giant confirmed in September that it had entered agreements to acquire a 73-acre greenfield site in Leixlip, Co. Kildare, to be the site of its new brewery.