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Ban on Smoking to Leave Guinness Flat

Posted on: Tuesday, 21 February 2006, 18:00 CST

By Tessa Thorniley, Daily Mail, London

Feb. 17--Britain's blanket ban on smoking will hit the already flagging sales record of Guinness, according to its maker Diageo.

Next year's prohibition on smoking in all pubs and clubs is expected to wipe 2pc-3pc off sales of the black stuff and boss Paul Walsh is taking pre-emptive action to protect the brand.

Trials for a lower-alcohol version of Guinness, with a 2.8pc alcohol content, are already under way in its Irish heartland and other innovations are being considered to entice new drinkers and revive sales.

Diageo has been left with a headache as the British beer market declines. Guinness volumes were down 5pc in the first half of the year to December 31, partly because the group refused to slash prices in the run-up to Christmas. Walsh said: "Any kind of price war is too damaging for the Guinness brand."

Interim profits rose 1pc at £1.4bn in the first six months. Tricky markets across Europe have prompted Diageo to slash its marketing spend in the region.

Elsewhere, the world's largest alcoholic drinks group toasted a 4pc rise in US drinks volumes or a roaring 11pc hike in volumes across its international businesses. The group is on track for the full year after an 8pc rise in group sales to £5.3bn.

Shares hit a year high to close up 13 1/2p at 868 1/2p on the back of a generally resilient performance.

Walsh has put together a crack squad of staff to make sure that Diageo's lessknown luxury brands, including its £30-a-bottle Ciroc vodka mark, are being sold in the most glamorous bars around the world.

Although accounting for a tiny portion of group sales, Diageo says that its upmarket reserve brands group is enjoying 25pc volume growth as drinkers " tradeup" around the globe.

In the first half, the core brands -- Smirnoff, Johnnie Walker, Bailey's and Guinness in the US put in a "solid" performance.

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Copyright (c) 2006, Daily Mail, London

Distributed by Knight Ridder/Tribune Business News.

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DEO, DGE,

Source: Daily Mail

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