Pubs groups entice drinkers off the couch

It sounds unthinkable, but it seems that the Irish are losing their taste for Guinness, says Rachel Stevenson in The Independent. In the last year, sales of Guinness in Ireland fell 6%. The obvious reasons for the slump are the slowing Irish economy and the smoking ban in pubs introduced this year. But is there another reason? asks Martin Flanagan in The Scotsman. According to Paul Walsh, chief executive of Diageo, which owns Guinness, today's twentysomethings are less keen on the "big night out". Walsh is too diplomatic to suggest the next generation is "turning into a generation of home-body computer nerds", but he does note that the trend is running concurrent with the rise in popularity of "electronic diversions", such as Apple's iPod.

Ordinarily, such claims could be dismissed as the product of an embarrassed executive's over-fertile imagination. But Diageo's comments chime with an earlier, similar warning from JD Wetherspoon. In May, London's second-largest managed pub operator warned that pubs were once again looking "unsteady on their feet" after their brief recovery from the 2002 price war, says the Investors Chronicle. Then, in July, it issued another warning, saying that profits this year will be at the bottom end of expectations. Again, one of the principal explanations was that "people are increasingly staying at home to drink".

The big problem for the pub sector is that supermarkets such as Tesco and Asda increasingly sell beer and lagers at "not far off loss-leader prices" in order to entice shoppers to fill their trolleys with more profitable items, says Flanagan. Pub groups, which, by their nature, have to put a floor under drinks prices to cover the costs of their overheads, are therefore finding it difficult to compete. In central London, for example, a pint of premium-brand lager costs less than £1 in a supermarket, compared with up to £3 in a pub. Another factor is the public outcry over "binge-drinking"; but while the pubs groups are in the frontline of the debate, the supermarkets have effectively been able to wash their hands of the issue.

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Moreover, the drinks industry is having to get to grips with a more general change in drinking habits. A typical night out for Britain's young now starts with a few sharpeners at home, before squeezing in one or two more in a pub, after which they move on to a nightclub. In other words, the pubs are being squeezed between home and the late evening venue, becoming a mere staging post between the drinks cabinet and the dance floor. According to the British Beer & Pubs Association (BBPA), almost 39% of beer now consumed in the UK is drunk at home, compared with under 10% in 1972.

Faced with this change in habits, the drinks industry needs to "think out of the bottle", says Martin Cole in Brand Strategy. Traditionally, drinks brands (think whisky) have focused on "heritage and authenticity" to drive sales growth. But the future may lie in innovation, by, for example combination products that mix spirits and beer, such as Kirska, a vodka beer from France. This seems to be very much Diageo's strategy, says Philip Aldrick in The Daily Telegraph. The firm is focusing on reinventing its brands. According to Walsh, sophisticated thirtysomethings don't think twice about paying £22 for a decent Martini, while Americans "don't blink an eye" at paying $300 for a bottle of premium scotch whisky. Thus, it hopes to entice consumers off the sofa with new versions of premium brands, such as Smirnoff Penka, that aren't available in shops.