Why not just buy a craft brewery? - Interview, Mark Sandys, global head of beer, Diageo - Part I

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In the first of a two-part interview, Diageo's global head of beer, Mark Sandys, talks to just-drinks' Lucy Britner about craft breweries, the company's new Open Gate Brewery project and why innovation is a growing part of Diageo's beer business.

Mark Sandys is global head of beer at Diageo

Mark Sandys is global head of beer at Diageo

Tourists from around the world are gathering at St James's Gate in Dublin. They are queuing to enter Ireland's most popular tourist attraction: the Guinness Storehouse. Seven floors of all things Guinness - from brand history to Guinness chocolate bars and key rings - await, and it's packed.

While this end of the 50-acre-plus site offers a look at what has made Guinness's past, the experimental Open Gate Brewery is a glimpse of the brand's future. Mark Sandys sits at a wooden table, facing a bar that offers a range of the new concept's latest efforts. Behind him is the brewery itself - a modest collection of stainless steel tanks. The stripped-back, industrial vibe is not unlike Brooklyn Brewery's communal tasting room.

"We've had an experimental brewery on-site for 100 years," says Sandys. "57 years at its current location." He concedes that, during most of its life, the facility would have been used for testing things like "how to extend the shelf-life of Guinness, rather than to create a substantially different beer". Now, it's home to a group of brewers who produce around 25 different beers a year - some are just for visitors to the Open Gate, while others might go on to be new product launches.

That the experimental brewery already existed provides, in part, the answer to my first question: Why not just buy a craft brewery?

"We thought that we could do it ourselves," says Sandys. "When you look at the success factors of other craft brewers - genuine stories, real people making the beer, quality ingredients, doing things in a small batch way - we're doing that already."

For Diageo, then, the noise it makes about its creation of 'craft' beers in a small brewery represents a substantial, new chapter in the history of Guinness.

"The beer industry at the moment is very different to any time over the last 30 years," says Sandy. "In Europe and North America, people are fascinated by beer - who makes it, how it's made, different ingredients... It's encouraging much greater experimentation than ever before."

For a number of years, Sandys says, Diageo's play was that Guinness draught beer was different from the 'usual line-up' of lagers that would be in many bars. Now though, the game has changed. In the US, one in three beers consumed are a new brand to the drinker, muses Sandys. That's a lot of different information for a consumer to digest - not to mention retain - for a repeat purchase. 

And that's where the Guinness brand name comes in. 

"When you walk in to a supermarket and, to an extent, a pub as well, it's confusing for the consumer," Sandys says. "A bit like I would've found shopping for wine before brands grew a little bit. 

"As a consumer is looking at the shelf, the Guinness name is the navigation point," he says. "Instead of saying 'I really like IPA and therefore I'm going to chose some IPA,' there will also be some consumers who say 'I really love and respect Guinness, I'm going to try their IPA.'"

Will every new release carry Guinness branding? In a word, yes, although Sandys says it will be less prominent on some beers - such as lager brand Hop House 13, which initially launched in Ireland last February. In fact, Diageo has rolled out several new Guinness products from the Brewers Project, including Guinness Dublin Porter, West Indies Porter and Guinness Blonde American Lager.

The company was keen for me to visit the Guinness brewery after I queried to them one evening in London what all of this innovation is doing for Guinness's core brand and trademark.

Diageo opened its experimental brewery to the public last November

"It's something that we monitor really closely," says Sandys. "What we see from all of the data that we have is that the existence of beers like Hop House 13, Dublin Porter, West Indies Porter improve perception of the Guinness trademark." 

First, the brand is seen as participating in the "beer revolution" and second, new beers extend the stories around brand Guinness, he says. 

"We're also seeing core Guinness draught in growth again," adds Sandys. "I remember when I first started as a trainee in the late 90s, the thought of Ireland being in growth just seemed impossible, because we were coming from such a historical base where we were over 50% share. Last year was the first year in seven years that Guinness was in growth and this year it has accelerated.

"Ultimately I think the driver of that [growth] is people moving away from lager as always being the default choice. Some people will go to IPA, some to traditional bitter and some will go to Guinness."

Speaking of IPA, among the most recent innovations is Nitro IPA, which rolled out the US earlier this year. It uses widget technology, developed by Guinness in the 1980s. The technology is fashionable among US craft brewers and Boston Beer co rolled out three Nitro releases earlier this year

"We're starting to take Nitro into other beer styles, too," adds Sandys.

Looking forward, then, it is of little surprise that innovation is expected to become a bigger part of Diageo's Guinness business: Three years ago, innovation made up 1.5% of total sales. Last year, it was 4% and this year, so far, it's 5%.

"We're aiming for 10% by 2020," says Sandys. 

That innovation is not limited to craft's US and Western Europe heartland. In part two, which can be viewed here, Sandys tells us more about Guinness Africa Special. We also look at how to get around tough regulations on selling alcohol in Indonesia and what's happening to Guinness in Korea.

Sectors: Beer & cider

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