By Emma Rumney and Padraic Halpin
LONDON/DUBLIN (Reuters) – Diageo (LON:) needs its leading stout beer Guinness to keep growing fast and is pushing a zero alcohol alternative. But price hikes are turning off some UK customers and opening the door to rivals such as Heineken (AS:)’s Murphy’s.
Guinness has been a much-needed bright spot in earnings for the world’s top spirits maker, under pressure after a downturn in sales of other key brands like Johnnie Walker whiskey in some markets helped force a profit warning last year.
Diageo has made continued momentum for Guinness a key part of its growth strategy. Future drivers include a potential roll-out of Guinness 0.0, the zero-alcohol version, on draught in pubs beyond Ireland. It is currently testing the move at The Devonshire pub in London.
But years of double-digit growth for Guinness have caught the eye of rivals, including the world’s top beer maker Anheuser-Busch InBev (EBR:), which hope to become more serious competitors to Guinness, a dark beer with a rich malty taste.
Meanwhile, a series of price hikes has irked Guinness customers like Shane Ranasinghe, who with co-directors runs seven pubs across south London, including The Montpelier in Peckham and The Railway in Streatham.
He and two other UK publicans Reuters spoke to said they had started pushing rival brands, in particular Heineken stout Murphy’s, to express their frustration and dent Guinness’ hold on the market.
Ranasinghe and his co-directors put Murphy’s next to Guinness on tap at their pubs, and later added signs advertising that Murphy’s is around one pound cheaper at between 5.60 pounds and 5.90 pounds ($7.10-$7.50) per pint.
“We said, ‘let’s give them (Diageo) some competition’,” he told Reuters. “It was a struggle at first. Now, one in four pints of stout are Murphy’s.”
Complaints like Ranasinghe’s are growing across London pubs, he and the two other publicans said, adding that as well as hiking prices Diageo had become restrictive in providing Guinness glassware and reduced the technical support on offer.
To be sure, Guinness remains by far the most popular stout. Previous efforts, including by Heineken, to break into the market have had little success.
But such frustrations offer an opportunity for rivals to capture more of stout’s growth in Britain as drinkers and pubs look to “rebel against Guinness’ dominance”, said Lee Williams, beer category manager at UK alcohol distributor LWC Drinks.
Stout sales grew 12% in…
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