Production will cease at five whisky distilleries - the Carnus grain distillery and four malt distilleries, Pittyvaich, Balmenach, Rosebank and Blandoch. Worldwide sales of whisky have declined, particularly in the US, the world's biggest market, while consumption is continuing to fall at home.
The rationalisation also involves transferring packaging activities at Perth, Broxburn, near Edinburgh, and Leith to Glasgow, Kilmarnock and Leven.
While the cuts were perceived to be positive in the City, the move caught many by surprise and Guinness shares dropped by 21p to 473p, just above the 1992/93 low of 471p. It will result in Guinness making pounds 125m of exceptional charges to its 1992 results, which analysts believe will yield pre-tax profits between pounds 780m and pounds 795m. Analysts do not expect to downgrade this year's profit projections, which centre on pounds 970m.
The size of the job losses, which will take place over three years, also surprised Guinness unions, although redundancy rumours had been circulating since before Christmas. Union officials said the total losses could exceed 800, representing one in six of the 5,000 employed by United Distillers in the production of Bell's, Johnny Walker and other Scotch brands.
Senior shop stewards will meet in Glasgow tomorrow. Bob Thomson, Scottish secretary of the GMB general union, said: 'We will be demanding a meeting with the Guinness board to reverse this decision.' He said the losses were 'unnecessary because they are making profits, and their profits growth is around 6 to 7 per cent.'
Harry Donaldson, the union's main whisky negotiator, added: 'Guinness boasts that United Distillers is the world's largest and most profitable spirits company. If it was having a bad time, there might be some excuse.' Union officials said the job losses were devastating and would destroy entire communities.
The claim was strongly denied by Guinness. 'The reality is investment to improve the business, and to keep things going along,' said Tony Greener, chairman and chief executive. 'The places where we are doing this will not collapse communities. The great majority of the losses are in the bottling halls.'
The shock waves from the announcement also reverberated in France at LVMH, the drinks and leisure goods company that has a 24 per cent cross-holding in Guinness. LVMH suspended its shares to announce that its share of the cost of the restructuring at Guinness would reduce net profits for 1992 to Fr3bn ( pounds 357m). The company earned Fr3.74bn in 1991 and provisionally said yesterday that its sales for last year were stable at Fr22bn.
The disclosure by LVMH sparked several rumours, largely suggesting that the group would have to sell assets to tackle its debts, which have become more of a strain because of recent increases in French interest rates.
Mr Greener played down the speculation over LVMH. 'There has been a complete over-reaction about LVHM,' he said. 'LVMH is required by the bourse to suspend its shares when it makes a big announcement.'
Guinness's cost-cutting also extends to Spain. Unspecified job losses are being made at Cruzcampo, the largest brewer in Spain, which employs 3,000 people. Guinness paid pounds 482m for Cruzcampo two years ago in a move hailed as a major expansion into the fast-growing Spanish economy.
The Spanish beer market last year shrank by about 5 per cent, mostly in the second half. 'The story is the same as the Scottish one,' Mr Greener said.
He said Guinness was aware that it had to look at productivity improvements, but the market decline was sharper than anticipated and prospects for this year did not look good. 'We can't simply wait and do nothing, and we must accelerate the plans.'
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