Guinness, Gen Z, and the Economics of a Foamy Frenzy

Imagine the agony: heading to your local pub (health club) anticipating a perfectly poured pint of Guinness, only to discover your local pub is out of stock. Welcome to the unexpected reality of Guinness rationing in Britain, an economic story brewed from a potent mix of celebrity endorsements, social media trends, and the immutable laws of supply and demand.

At the heart of this tale lies a fundamental economic principle: scarcity. Diageo, the multinational brewing giant behind Guinness, faces a peculiar conundrum. Despite pulling all the levers of its Dublin brewery, it simply cannot keep up with an extraordinary surge in demand. The result? Guinness has become a classic case of excess demand in action, providing a vivid illustration of how markets—and tastes—work.

The Perfect Pint Meets the Perfect Storm

Traditionally favoured by older men and rugby enthusiasts, Guinness is now the toast of Gen Z, thanks to a savvy marketing blitz. When Kim Kardashian was photographed sipping a pint in London, and Olivia Rodrigo sported a “Guinness is good 4U” T-shirt, the brand’s cool factor skyrocketed. Social media amplified the effect, with influencers showcasing the iconic stout in perfectly staged photos.

This shift in consumer preferences reflects the economic concept of demand-side changes. Younger consumers, many of whom value authenticity and retro appeal, have embraced the 265-year-old drink. Viral trends like the “tilt test,” where drinkers check the creaminess of their pint at a 45-degree angle, have only added to the drink’s allure.

A Stout Lesson in Supply and Demand

But here’s the rub: Guinness’s production is constrained. The Dublin brewery is operating at full capacity, and while Diageo is investing in new facilities, these take time to come online. Until then, Guinness faces a supply-side bottleneck.

In a perfectly competitive market, firms typically respond to increased demand by raising prices—a textbook example of the price mechanism at work. Higher prices act as a signal to consumers to moderate their purchases while incentivizing producers to ramp up supply. Yet, Guinness has largely resisted price hikes, instead opting to ration its product to pubs, a strategy that underscores the complexity of balancing brand loyalty with profitability.

Viral Marketing and the Economics of Fads

Guinness’s recent boom also highlights the role of consumer behaviour in shaping markets. The drink’s newfound fashionability can be likened to a Veblen good, where desirability is partly driven by its perceived social value. Posting a photo of a pint has become a status symbol, a way of signaling alignment with a cultural moment.

This phenomenon illustrates the interplay between economics and psychology. While the total market for beer has shrunk, Guinness has bucked the trend, enjoying a 20% surge in demand for draught pints between July and October—a stunning contrast to the overall decline in beer sales.

Lessons from a Liquid Gold Rush

For pub landlords, Guinness’s scarcity is a double-edged sword. On the one hand, its popularity draws customers. On the other, rationing means they must carefully allocate limited stock, testing their ability to manage supply chains in real-time. Diageo’s predicament also serves as a reminder of the importance of price elasticity of supply. When production cannot quickly scale to meet demand, even the best-laid marketing plans can run into logistical limits.

Meanwhile, Guinness enthusiasts may take solace in Diageo’s long-term investments, including a €200m brewery in County Kildare. Until then, however, they’ll need to embrace the economics of patience—or seek out alternative brews.

Glossary of Key Economics Terms

1. Scarcity: The fundamental economic problem of having limited resources to meet unlimited wants.
2. Excess Demand: A situation where the quantity demanded of a good exceeds the quantity supplied at the current price.
3. Supply-Side Bottleneck: Constraints in production capacity that prevent firms from increasing supply.
4. Price Mechanism: The process by which prices rise or fall to balance supply and demand.
5. Demand-Side Changes: Shifts in consumer preferences or purchasing behaviour that affect the market demand for a product.
6. Veblen Good: A product whose desirability increases as its price or perceived social status rises.
7. Elasticity of Supply: The degree to which producers can increase output in response to changes in price.
8. Consumer Behaviour: The study of how individuals or groups select, purchase, and use goods and services.

Graham Watson's insight:

Changing consumer tastes and Guinness - what's not to like? However, the rising popularity of Guinness means that its brewer, Diageo, are having to ration its supply to British pubs. In short, at current prices, there's excess demand, and if the company aren't prepared to raise its price, then they'll have to ration it.