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Brexit poses supply chain challenge for Guinness

While global drinks giant Diageo can absorb the economic shock of border checks between the Republic of Ireland and Northern Ireland, the hundreds of smaller companies that supply it might not be so lucky

By Joseph Stenson  /  AFP, DUBLIN

A pint of Guinness sits on a table at The Gap O’ the North pub in Jonesborough, Northern Ireland, on Oct. 19.
Warning: Excessive consumption of alcohol can damage your health

Photo: AFP

With its brown-black hue and cascading creamy head, Guinness is Ireland’s most iconic export.

However, any post-Brexit border controls on the island of Ireland could end the free-flowing supply chain that makes the stout a staple at home and around the world.

Guinness has been brewed since 1759 at the St James’ Gate brewery, a vast brickwork complex on the banks of Dublin’s River Liffey.

On any given weekday, pristine tankers — known as “silver bullets” — brimming with stout roar out of its gates and cross the invisible border to Northern Ireland.

They are bound for Belfast, where the “Irish champagne” is packaged for international consumption.

“The Irish drinks market is completely an all-Ireland economy,” Alcohol Beverage Federation of Ireland director Patricia Callan told reporters in a Dublin pub roaring with trade. “It happens on both sides of the border.”

London and Dublin have both pledged that no hard border infrastructure would interrupt trade between the Republic of Ireland and the UK territory of Northern Ireland after Brexit.

However, the UK and EU are locked in a stalemate over the “backstop” — the trading status for Northern Ireland — “unless and until” an enduring accord is forged.

Little progress is being made and, as the March 29 divorce date approaches, the specter of border checks is vexing the Irish drinks industry — which makes 23,000 border crossings yearly, Callan said.

“Any delay at all to that, even an hour’s delay, would work out at about a 100 euro [US$113] per truck cost,” she said.

Guinness is owned by global drinks giant Diageo PLC, which with net sales last year in excess of £12 billion (US$15.6 billion) holds coffers likely capable of absorbing economic shock.

About 35 percent of the company’s beer, including Guinness and other brands, are produced at St James’ Gate, 2014 figures showed.

Three million pints of “the black stuff” are brewed there every day.

However, Diageo chiefs have told how they sit at the top of a supply chain of hundreds of smaller, more exposed companies providing the key ingredients with no thought for border crossings.

“For us, having kind of a frictionless border where you can move people and goods is incredibly important,” Diageo Europe president John Kennedy said last year.

“We’ll figure that out as a big company, but then you add the supply chain of medium and small companies that we work with who multiply that number significantly — it could be a big burden if crossing the border became onerous for them,” he said.

Seamus Leheny of Northern Ireland’s Freight Transport Association said Brexit turbulence could force Diageo to wind down its Northern Ireland plant.

“They’re just treating it as business as usual, but I know they’re concerned,” he said.

The Belfast plant is “without a doubt” in danger he said, adding: “The contingency plan for dealing with a no-deal Brexit is relocating some of your operations into the Republic [of Ireland].”

Those remarks were earlier this month echoed by Vince Cable, the leader of the anti-Brexit Liberal Democrats opposition party.

Diageo brands like Guinness and Baileys face being “seriously disrupted,” he said.

“In an extreme scenario, where there is no deal or a very bad deal, you could see these favorite products drying up,” he added.

Guinness is a vital concern for the Irish beer export market — the eighth-largest in Europe, valued at 273 million euros last year, according to October figures from the Irish Brewers’ Association.

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