Diageo to build new Irish Guinness brewery

By Andras Gergely and David Jones

DUBLIN/LONDON (Reuters) - Drinks maker Diageo will spend millions on a new brewery near Dublin, but Guinness fans in Britain and Ireland will still get their dark beer from the historic brewery in the heart of the Irish capital.

The London-based beer and spirits maker said on Friday it will renovate its central Dublin brewery at St James's Gate to supply these drinkers, but will close two smaller sites by 2013 and cut its Irish brewery workforce by more than half.

In five years, when the new brewery opens after an investment of 520 million pounds and smaller ones at Kilkenny and Dundalk are closed, Diageo says its Irish brewing workforce will be cut by 250 from its current 450.

The move means a reprieve for the St James's Gate site near the River Liffey, where Arthur Guinness started brewing his stout beer in 1759 after purchasing the dormant brewery with 100 pounds he had been left in his godfather's will.

"Every option was looked at. That includes the closure of St James's Gate. We did some research, we listened to our consumers, we heard what everybody said and we understand the importance of St James's Gate," David Gosnell, Diageo's global supply director, told a Dublin news conference.

Diageo Chief Executive Paul Walsh said the move had been prompted by efficiency gains to be made by focusing most of its Irish beer production on one site, and also to meet the growing export demand for Guinness especially from Africa and Asia.

"This reaffirms Diageo's commitment to Guinness and at 650 million euros (515.8 million pounds) is the largest investment in the history of Diageo," Walsh told a conference call. Beer earns a fifth of Diageo's profit, of which Guinness accounts for around half.

But Walsh declined to specify what cost savings would be made as these will only occur in 2013 and beyond. Diageo will take a one-off charge of 120 million pounds to implement the plan in its accounts for the year to June 2008.