Diageo Beer Company USA has announced its intention to build in Relay a U.S. version of Dublin’s popular Guinness Open Gate Brewery.
Holdout prohibitionists aside, it’s welcome news for most everyone, returning jobs to a production facility that closed in 2015, returning revenue to the tax rolls, promising the development of new products, turning a formerly inaccessible historic asset into an anchor for tourism, and even piquing the interest of local craft brewery competitors who expect benefits to spill over to their own businesses.
As envisioned, the company would build a mid-sized brewery and Guinness visitor experience center with an innovation microbrewery to test-market new products.
The new brewing capacity and visitor space, combined with an existing packaging and warehousing operation, would bring Diageo’s investment to approximately $50 million.
Although Arthur Guinness’s iconic dry stout will continue to be brewed at St. James’s Gate, in Dublin, the new brewery would be a home for other Guinness beers created for the U.S. market.
According to Diageo Spokesperson Ann Beegle, visitors would be able to tour the working brewery and purchase Guinness merchandise at the retail store. “They would also be able to sample experimental beers brewed on-site at the taproom and give feedback, helping Guinness decide which new beers they might bring to market,” she said.
Finalization of plans is dependent on several unspecified contingencies and are still under negotiation.
The project would re-establish a Guinness brewery in the U.S. after 63 years of absence and breathe new life into the site of the historic Calvert Distillery, established in 1933 as Maryland’s first legal distillery following prohibition’s repeal.
The House of Seagram purchased the Calvert distillery in the mid-1930s and continued production, but eventually shuttered operations in 1990 and auctioned off the distilling equipment.
Diageo acquired the Seagram portfolio in 2000 and operated a bottling facility in Relay until 2015, when Diageo decided to consolidate its bottling operations in Plainfield, Ill. Approximately 103 workers lost their jobs when the bottling operation closed.
Diageo’s Senior Director of State Government Relations Dwayne Kratt said Relay was chosen as the preferred location for this project to take advantage of its proximity to major East Coast tourist and population hubs, the availability of skilled employees, and space to build and adapt existing structures on the property.
“We also recognize that there’s a well-established craft beer culture in Baltimore and Howard County and extending up to Frederick County,” Kratt said. “There has been growth in Maryland, but not as much as in other big beer areas like Asheville, N.C. We plan to work with local brewers and do what we can to make this area a beer tourism destination place.”
While specifics are still being evaluated, it is estimated that the new project could generate 40 jobs in brewing, warehousing and an agile packaging operation, which may include canning, bottling and kegging.
The visitor center could create approximately 30 additional jobs.
According to Forbes magazine, North America accounts for about one-third of Diageo’s net sales and half of its operating profits.
Diageo reported a decline in net sales and volumes in this region in the first half of its fiscal 2016 (the six months ended December 2015), although performance improved in the latter quarter and appears to be gaining strength rapidly.
Forbes also reported that changes in Diageo’s executive team around this time led to improved attempts to connect with consumers and the exploration of new partnerships.
Although the consequences of Brexit are still unknown for London-based Diageo, analysis by Trefis Research (an interactive financial community that focuses on popular stock trends, forecasts and insights) indicates that a potentially weaker pound and stronger revenues originating outside of Britain could result in a significant rise in the company’s earnings.
In other words, the timing of Diageo’s investment in expanding an already proven concept, like the experimental Open Gate Brewery, in Dublin, could be perfect.
Eye to Eye
Diageo’s proposed brewery site is less than 1.25 miles distant from Heavy Seas brewery, as the crow flies. Having such a powerhouse player move in right next door might be a disconcerting thought for some new to the game, but Heavy Seas Owner Hugh Sisson, who built Maryland’s first brewpub in 1989, isn’t worried.
“I think it’s awesome,” Sisson said. “We see lots of opportunity for partnerships and for tourism tie-ins, and they see it too. I think it’s going to be good for the industry.”
Brand loyalty has evolved, Sisson said, with beer lovers these days not only willing to experiment and try new products, but also to visit and compare different brewpubs and breweries when they travel, spending money on drinks and food, and buying merchandise.
So far the only potential concern Sisson sees with Diageo is a legislative issue tied to raising the license ceiling for the amount of beer that can be sold across the bar. With on-premises sales currently limited to 500 barrels per year in Maryland, the Brewers Association of Maryland is pursuing statewide legislation that would raise the sales cap to 4,000 barrels per year for all brewers, while Diageo is pursuing the creation of a special license allowing it to sell up to 5,000 barrels per year.
“Our hope is that Diageo will help us get the statewide bill passed, then retract their own bill,” Sisson said. “It’s going to look bad if the legislature gives a large global conglomerate benefits that their home-grown businesses don’t have.”
Kratt said Diageo is willing to work with Maryland brewers and is supportive of a statewide sales increase, but declined to speculate on the separate license issue.
In any case, “a cap increase is needed to make this project successful,” Kratt said, particularly if Diageo’s projection of 300,000 visitors during the brewery’s first full year of operations is accurate.
“We’re modeling this project off of what we do in the Dublin facility, which gets up to 1.7 million visitors a year,” he said.
Tom Quirk, chair of the Baltimore County Council whose district includes the Relay site, is among those who want to see it come to fruition.
“More than just a brewery, this is a significant investment in our community that represents a new direction for the historic Relay facility,” Quirk said. “Leveraging Guinness’s 250 years of brewing heritage and capitalizing on its great location will be a strong boost for tourism, not only in the county, but the entire region.”
Diageo hopes to receive approvals and to begin construction this spring, with the goal of opening the brewery this fall to mark the 200th anniversary of Guinness being first imported into the U.S.