Diageo ups prices – trade awaits….

Following Diageo’s recent price increase announcement, the licensed trade waits to see if and when other brewers and suppliers will follow suit in applying an increase.

Traditionally, in the past, other suppliers to the trade have waited until Diageo has initiated a price increase before introducing one of their own.

The increase has been described as “bad timing” by some publicans with a Budget just a few weeks up the road.

A number of publicans contacted by Drinks Industry Ireland still hadn’t received a letter of notification from Diageo.

The increase across Diageo Ireland’s beer brands will also apply to off-trade sales and will be introduced on October 30th and was “significantly less than the inflation rate for food products as measured by the CSO’s wholesale price index,” the company stated.

However the move could cost “thousands of jobs at the stroke of a pen”, according to the VFI which expressed “shock and disappointment” at the increase.

“This is a disaster for the hospitality industry and indeed for Irish consumers and tourists at a time when we are all trying to boost consumer confidence, to get people spending and to reinvigorate a trade already on its knees,” it stated, “This announcement will further dent that confidence.

“Publicans all over Ireland are struggling to keep their doors open and it is inconceivable and desperately disappointing that Diageo has taken this step that will put further pressure on publicans and consumers nationwide. Publicans are doing everything within their powers to keep their businesses alive and their staff in jobs and value is essential to this survival.”

Recent DIGI figures show that the on-trade supports more than 54,000 jobs throughout the country and has experienced continued decline throughout 2012 to date with a year-on-year decline of eight per cent when compared with this time last year.

A reduction in the number of pub licences from 7,509 to 7,359 has also taken place since last year. In 2005 there were 8,617 licences.

“The majority of our members run family businesses and often in areas where there is little other employment,” the Federation stated, “At a time when all those in the drinks industry should be working together keeping pubs open and maintaining employment, this is a unilateral move on Diageo’s part and whether they like it or not, it will cost jobs.
 “Only two weeks ago they were asking us all to paint the town black – that is certainly the mood amongst our members today,” the Federation concluded.

Diageo blamed the need for the increase on soaring input costs including barley prices (up 105 per cent in the last three years) and energy costs (up 102 per cent). Altogether, raw materials costs had doubled since 2009, it stated, adding that this was the first increase in four years.

The increase was essential, it said, if it was to maintain its investment in the Irish pub trade. Diageo spends around €55 million a year on the Guinness Quality Programme as well as other forms of on-trade support.

Sign Up for Drinks Industry Ireland

Get a free weekly update on Drinks Industry trade news, direct to your inbox. Sign up now, it's free