Guinness's American Strategy
Last month I traveled to Baltimore to learn more about the new Guinness brewery project unfolding there. Guinness is a sponsor of this blog, and I wanted to be one of the first to delve deeply into the thinking behind the project, its scope, and its goals. Guinness was happy to make this possible, and paid for me to visit. Today I look at the new national strategy that accompanies the Baltimore brewery project.
Diageo, Guinness's parent company, is expecting the new Guinness brewery in Baltimore to attract 300,000 people in its first year. Those are titanic numbers and they'll grow as time goes on. But the brewery is just a piece of a much larger strategy. Diageo would like to see the Guinness brand grow and establish a bigger presence in the US—as something other than solely an Irish stout. This is a big challenge and a unique one for a brewery that has such a distinctive brand not, like nearly other multinational brewery, based on mass market lagers.
Guinness quietly sells about a million barrels a year in the US—as much as Sierra Nevada, which would make it the 10th largest standalone brewery here. It’s also been growing about 5% over the past year at a time when many other brands are shrinking. “Guinness” still means Draught Guinness, the 4.2% flagship, almost universally, but the brewery has been dabbling with other products for awhile: Blonde, Nitro IPA, Golden, Rye Pale, Irish Wheat, plus historical releases and a beefed-up slate of stouts. In Ireland, Guinness has had big success with Hophouse 13, a Mosaic-hopped golden ale the brewery strangely labels a lager.
These moves provide the outline of a strategy as Guinness inches away from its hard-won and long-established reputation as an Irish Stout made in Dublin for hundreds of years. But this is also the greatest danger. That reputation, simply put, is the strongest in all of beer. The Irish pub is an international institution. There may be a country without an O’Malley’s somewhere, but I haven’t found it. And all those pubs pour Guinness, with its signature surge (and, with sadly decreasing regularity, Beamish and Murphy's). There’s a reason Guinness is the most-visited tourist stop in Ireland; for the rest of the world, Ireland means pubs and, especially, Guinness. This reputation is particularly potent in the United States, where so many people claim Irish descent. Guinness signals heritage and history, and Americans even feel a bit proprietary about it.
Compare that to the identities of other multinational brands: Heineken, Carlsberg, Kirin. How many Americans could name where these brands come from? The Netherlands is associated with windmills, canals, and dikes, not beer. Just the fact that Guinness is an ale and black distinguishes it in a way that makers of mass market lager would kill for in the craft era.
A New Approach
So putting different kinds of products in the market comes with real risk. This problem is hardly unique to Guinness, though—every brewery with an older, sagging flagship confronts the same choice: go all-in on existing brands and identities or explore ways that expand the portfolio but risk undermining the identity. Guinness is well aware of the challenge, and when I sat down with marketing manager Oliver Gray to discuss Diageo's Guinness strategy, he acknowledged it immediately.
"It's got to be the biggest challenge. Guinness Draught is our number-one seller and will be in the new brewery. It's a huge balancing act. You don't want to alienate those same drinkers who want the best pour this side of the Atlantic here at Guinness, but you have to attract the people who don't drink nitrogenated stout, people who don't have a tie to that iconic Irish brand."
The company’s approach runs on parallel tracks. The first is expanding the palette of flavors in the stout spectrum, something Guinness started doing in America with the (long-overdue!) introduction of Foreign Extra Stout several years ago. It joins Antwerpen Stout at the brewery—an even bigger, bolder beer. Finally, Diageo has invested in a large barrel-aging program that will pull together their whisk(e)y and stout assets (among other liquors, Diageo owns Scotch brands Lagavulin, Talisker, and Oban as well as Bulleit bourbon). This is a clever way to get both beer geek street cred while still staying well within the lines of the brand identity.
Track two is what we might call the “American craft” track. The Baltimore brewery is outfitted with a ten-barrel kit for draft-only beers served mainly onsite. This is an entirely typical arrangement at larger companies, and allows brewers to put twenty kegs into the market and see how customers react. I spoke to brewmaster Peter Wiens and head brewer Hollie Stephenson when I was there (their backgrounds and vision will be part three of this report). Hollie, who has brewed at Stone and Highland, has a particular interest in IPAs, but the taplist will soon be featuring everything from goses to lagers to saisons. Guinness also plans to package and distribute a portfolio of four beers locally, and these fall into a more mainstream continuum. Gray:
“As it stands our four core beers are likely to be Guinness Blonde (which obviously already has national distribution), our popular IPA, a carbonated milk stout, and an aromatic wheat beer that is being worked on by Hollie right now.”
The New American Beers
The IPA and milk stout are both already dialed in. The IPA on tap st the Test Taproom in Baltimore is a different beer than Nitro IPA. It’s not a hazy; it’s more assertively bitter and one might place it in the west coast continuum, except the hops are more on a peppery/earthy continuum that evokes the UK. It’s very American, but not quite categorizeable. The milk stout is probably never going to get the attention it deserves (it’s just 4.5%), but it’s a real triumph The lactose gives it the body and creaminess you want for style, and really helps round out the mouthfeel so it doesn’t seem thin. There’s a sweetish note up front, but it fades quickly to medium-roast coffee and cocoa notes and, best of all, a nice, dry finish. Of all the beers I tried, this was in its own category of specialness.
I have heard whispers that the wheat beer will be a witbier, but I hope not. A Belgian style would really strain the identity, as well as echoing Blue Moon and Shock Top, which is not a good look. Perhaps it will be different enough to dissuade comparisons to those.
Beyond these initial four—which will sink or float based on their popularity—the brewery will scale up other beers based on their success at the brewpub. That’s when the real experiment about Guinness’s identity will take shape. If there’s a Rosetta Stone to unlocking Guinness’s strategy, it’s the focus on Americanizing the brand for the home audience.
"Right now we have no Irish brewers on the team,“ Gray told me. “We're Americans; Marylanders. It is a gamble; let's not kid ourselves. There may be people who think, 'It's not brewed in Ireland, so why would I drink Guinness anymore?'"
An Old New Strategy
I asked whether the brewery plans to use the Baltimore brewery as an incubator for beers to sell elsewhere—Europe, in particular.
“It’s the only brewery of its kind right now, but never say never. The US was an obvious market to develop a brewery – over the past 10 years or so it’s been the most creative beer market in the world, and we wanted to get closer to the action. The brand is very strong here and we feel we can bring something distinct to the table.”
The strategy is unusual in 2018, but is in many ways a return to a very old practice by Guinness: developing local markets and creating specific products to sell there. In the 19th century, for example, Africa became a major market for Guinness, and following independence of individual countries following WWII, Guinness started opening breweries on the continent. They do make stout—those were the beers that became popular decades ago—but they’re unique to place, made with sorghum or corn. When I spoke to Ryan Wagner, one of the Guinness ambassadors, he invoked this history when talking about the way “American Guinness” might evolve.
As a corollary, the classic stouts will never be made in America, either. Those are characteristic of Dublin, and will continue to be made only at St James Gate. American beers from Baltimore, Irish beers from Dublin—two tracks following the products of two breweries.
(There’s a test brewery at St James Gate that functions like the Baltimore brewery for the Irish market. Those, too, follow a craft track, but are aimed for the different palates of Irish drinkers. Indeed, many of the recent releases in the US—Nitro IPA, West Indies Porter, Irish Wheat—were developed without deep insight into the American tastes. The Baltimore brewery is an attempt to rectify that for the American market, while Open Gate Dublin will be free to cater to locals there.)
An Experiment to Watch
Every large brewery in the world, from those the size of Brooklyn and Deschutes up to AB InBev, is trying to figure out how to survive the transitions besetting the beer industry now. It’s far too early to start talking about successful strategies—we just don’t know, yet. Each approach can be read as a different experiment, though, and the one Guinness has planned is unique. Unlike most larger companies, which have settled on a strategy of craft beer acquisitions, Guinness is tacking into the headwinds behind its own label and in a brewery of its own construction. It is a big, bold, and fascinating experiment, and will be watched closely for signs of success.