Tuesday, 12 May 2015

Guinness at the start of the 1950’s

Annual general meetings of public companies can be great resources. They often tell you a lot about what was going on in a brewery.

This is a report of the speech given by Guinness chairman, the Earl of Iveagh. The year seemed to mark a changing of the guard within the Guinness family.

“My first task is to welcome here on the board the two representatives of the sixth generation of the Guinness family, in regard to whose appointment a formal resolution will be put to you shortly. Since our last annual general meeting we have suffered a very grievous loss in the death of my brother, your vice-chairman, who had for over 50 years been so closely connected with the brewery. The issue of "Guinness Time" with which you have, each been supplied contains an article that gives some idea of the contribution that over that period he made to the brewery's development and expansion. This loss has followed on the tragic death in Cairo in 1944 of my youngest brother, Lord Moyne, and in the following year that of my only son who was killed in Holland shortly before the end of the war. Now they have gone, and I am getting old. So that it is time that the next generation begin to take up their burden. My nephew, the present Lord Moyne, will become vice-chairman in the place of Mr. Ernest Guinness.”
"Brewing Trade Review, 1950", pages 87 - 88.

It’s clear that, despite being a public company, Guinness was still very much controlled by family members. I wish it still were. When corporate suits took over the company, that’s when everything turned to shit. Ernest Saunders was in charge when the grist was cheapened in the 1980’s by the inclusion of 20% flaked barley.

It sounds as if the war had been kind to Guinness, with increasing sales:

“As you will see, your directors have proposed that the distribution should be maintained at the same rate as for last year and for some years past. We have maintained, but only just maintained, our position because, though our sales have increased as compared with the previous 12 months, during which rationing in Great Britain had restricted us, yet costs have mounted still faster. The chief problem that faces us now is that while there seems still to be no end in sight to the rise in costs, we cannot hope any longer to mask the effect by increased sales.”
"Brewing Trade Review, 1950", page 88.

Guinness was in a weird position in WW II. It had two breweries, one in Dublin in neutral Ireland, the other in London. While a majority of its sales were in the UK. The German U boat campaign against British shipping also had an effect on Ireland, which was dependent on Britain for the supply of many goods and whose own international trade was disrupted.

This is an overview of Guinness sales during and immediately following the war:

Guinness sales 1939 - 1950
UK Ireland Export
barrels % barrels % barrels % total
1939 1,159,136 59.82% 754,655 38.94% 0.00% 1,937,844
1940 1,101,831 59.34% 729,300 39.28% 0.00% 1,856,781
1941 1,516,327 63.36% 852,760 35.63% 0.00% 2,393,128
1942 1,397,052 60.84% 885,680 38.57% 0.00% 2,296,160
1943 1,445,492 58.84% 992,394 40.39% 0.00% 2,456,792
1944 1,503,145 57.17% 1,095,294 41.66% 0.00% 2,629,342
1945 1,723,134 58.04% 1,218,594 41.05% 27,189 0.92% 2,968,917
1946 1,685,573 56.50% 1,276,563 42.79% 20,916 0.70% 2,983,052
1947 1,648,447 58.26% 1,140,257 40.30% 40,874 1.44% 2,829,578
1948 1,575,117 54.04% 1,282,597 44.00% 57,124 1.96% 2,914,835
1949 1,731,329 54.87% 1,364,903 43.26% 59,209 1.88% 3,155,441
1950 1,760,079 54.98% 1,373,050 42.89% 68,393 2.14% 3,201,522
"A Bottle of Guinness please" by David Hughes, pages 278-279

You can see that there was a big jump in sales in 1941 in both the UK and Ireland. After 1945, sales in the UK fell, but started to rise again in 1949. In Ireland, other than a blip in 1947, sales rose every year after 1940. Between 1939 and 1950, total Guinness sales rose by 65%. Which is pretty damn impressive.

This bit about wholesale prices is interesting:

“I think it is worth considering for a few minutes the results of the exceptional decade out of which we are now passing. After a period of disturbance and difficulty we passed into a sellers' market, in which our sales increased considerably. So far as such increased volume enabled reductions in cost of manufacture to be secured, we have passed on the benefit to our customers. Whereas overall wholesale prices in both the United Kingdom and in Ireland are now about 125% above the 1938 figure, the wholesale price of Guinness, exclusive of duty in both countries is less than 50% above the 1938 figure.

Even allowing for some reduction in strength, it is a remarkable achievement —  all the more seeing that the cost of the malt used is now more than double, and of the hops treble the pre-war price— and our fuel costs are also nearly trebled. I believe that the benefit of this has largely reached the consumer himself. ”
"Brewing Trade Review, 1950", page 88.

Note that he says “exclusive of duty”. The large increase in beer duty during the war would make the figures inclusive of duty look much less rosy. In general, the war was responsible for a great deal of inflation.

What were Guinness doing with all the money flowing in?

“The increase in volume naturally produced increased profits; a large part, of which has quite properly gone to the Government in the form of E.P.T. amounting to many millions. We have used the remainder to build up our reserves for two objects which we regard as vitally important for the welfare and prosperity of the company : (a) to be better able to meet the cost of modernisation, extension and replacement of our plant as necessary, at prices vastly higher than had been previously allowed for and, of course, also vastly higher than is admitted in the depreciation allowances for income-tax ; and (b) to initiate for the benefit of our staff, employees and their widows the large pension trust fund which has just been launched and to which a contribution of £2,000,000 has already been transferred.”
"Brewing Trade Review, 1950", page 88.

Paying it in tax, is the answer. E.P.T. is Excess Profits Tax. The government could basically confiscate any profits it though excessive. I’m surprised the chairmen was so easy going about having their profits stolen.

Notice one big difference with Watney in terms of expenditure? Having no tied houses, Guinness didn’t have to spend anything on their pubs. Their only real capital investment was their brewery and its equipment.

I knew that Guinness operated a brewery in the US for a while, but gave it up when they realised drinkers found Stout imported from Ireland more exotic. This tells us more about what Guinness brewed in the US

“Last year I was able to report some progress in our export trade. I am glad to be able to say that this year again we have made some further progress, and we are taking steps to accentuate our export drive. I visited the Now York brewery myself this autumn. I was very pleased with what I saw, and I found the draught Guinness that we are supplying in a number of the New York bars very reminiscent of the old draught stout that we sold in Ireland before the first World War. But it is, as I warned you, going to be a long and difficult road there; and it. in no use expecting quick and spectacular results.”
"Brewing Trade Review, 1950", pages 88 - 89.

Pre-WW I Extra Stout. So presumably a beer of over 7% ABV. Lucky Americans.


The Beer Nut said...

"we passed into a sellers' market": Guinness-speak for "all our serious competitors are now dead."

Gary Gillman said...

Why would Guinness sell in the U.S. a different form of draft stout than at home given too American lager was at best 5% ABV and often less (from 3.2 to 4.8)? Products such as Ballantine IPA which high ABV's were tiny sellers...

Even if he was referring to hop or grist characteristics rather than ABV, again why the difference?

The only thing I can think of is, Guinness Foreign Extra had long been exported to the States so perhaps it was felt a draught form of Guinness had to have a similar complexion.


Mike Austin said...

I think the flaked barley must pre date Saunders. Dave Line's home brew books had it at 20% in the 1970s, supposedly based on information from Guinness. Did Saunders perhaps increase it to even more?

Ron Pattinson said...


because that's what they'd always sold in the US. It had been the export version - Foreign Extra Stout - that was exported to the USA. Only logical that that's the beer they'd brew there. FES and Extar Stout had the same gravity until 1916, hence the bit about pre-WW I Stout.

Ron Pattinson said...

Mike Austin,

I'd have to check again in "A Bottle of Guinness, Please". I think that says when flaked barley was introduced.

The Beer Nut said...

Could there be an ancestral connection between that old-fashioned US-brewed Guinness and the 6% ABV Guinness Extra Stout that's still exclusive to North America?

Oblivious said...

In 1972 Park royal where using 20% flaked, 9-10 roasted malt and the rest pale

1983 is the big jump to what we know today the magic ratio of 60:30:10 pale:flaked barley and roasted barley

I haven't see any other dates early with it use. But David does say in 1972 "By now both breweries (Dublin, Park Royal) were using some form of adjutant to all malt"

Gary Gillman said...

The next logical move for Guinness is to brew with all-malt again - a specialty item like this would develop legs surely. If bottle-conditioned/naturally dispensed, even better. The recent brace of new products including West Indies Porter, and the earlier FES or Foreign Extra products, don't go this far and aren't "there" in terms of taste in my humble view.

I believe the current spec for standard Guinness is 10% roast barley and 30% raw barley - it's not flaked anymore - which is pretty high for adjunct from a craft standpoint anyway.


Ron Pattinson said...

Beer Nut,

yes, I think there must be a connection with the 6% US Extra Stout.

The Beer Nut said...

St. James's Gate is technically incapable of creating unpasteurised beer. They'd have to build an entirely new brewhouse for it, and they're not going to do that.

Gary Gillman said...

Why is that Beer Nut? Why not just by-pass the tunnel pasteurizer stage? I can't believe it's that complicated and one day I predict Guinness will do this, or buy a craft brewery, it's just a question of time. They can't be unmindful of what AB InBev have done, what Miller Coors has done, what Heineken did 20 years ago (return to all-malt), etc. Just a question of time. If they don't, they will ever fall behind in sales and influence, IMHO again.


The Beer Nut said...

I believe it's to do with the food hygiene and safety certifications that the brewery has in place. What seem like small changes to procedure have knock-on effects for their system which makes them impractical to do. Even their experimental barrel-ageing facility is kept safely on a distant part of the campus, away from the brewhouse.

There's no sign of them falling behind anyone in their key markets so I can't see them making radical changes. When The Brewers Project is wound up they'll just retreat to their usual core business for a few years, like they did after the Brewhouse Series was wound up; like they did after the St. James's Gate beers were wound up.

Gary Gillman said...

If they want, they can find a way, I'm quite sure.

And see this: