Drinks giant Diageo pledged to keep its St James's Gate site in Dublin open to protect the heritage of the Guinness brand amid a massive shake up of Irish operations.

Instead it will close its breweries at Kilkenny and Dundalk at the cost of more than half of the 450 brewing staff employed in the country.

A 650 million euro (£515m) investment package will consolidate works at St James's Gate, where production will be cut by a third. A new brew house on the north of Thomas Street in the capital will supply one billion pints a year to the Irish and British markets.

Work at Kilkenny and Dundalk will be transferred to a new world-class brewing centre of excellence planned for an unspecified location close to Dublin city in 2013.

The Guinness Workers Union (GWU) said staff were shocked at the proposals.

Diageo chief executive Paul Walsh said the plans would support the long-term success and growth of Guinness around the world, as well as the other beers brewed for Ireland, the UK, and international markets.

"This will be the single biggest capital investment made by Diageo in its supply infrastructure since the company's creation 10 years ago and will enhance the cost-competitiveness of our global beer operations," he said.

The sight, sounds and smell of the 64-acre brewery near the River Liffey have been a part of Dublin's character since Arthur Guinness started brewing there in 1759.

Some 100 million euro (£79.3m) of the overall investment package will go into revamping the St James's Gate brewery and Guinness Storehouse, which attracts more than one million visitors a year.

Surplus land in Dublin, Dundalk and Kilkenny will be sold for an estimated 500 million euro (£396m).

The company – which also produces Bushmills, Baileys, Budweiser and Carlsberg – said operations in Waterford would be streamlined; the Belfast packaging facility will be unaffected.

Sean Mackell, general secretary of the GWU, said it opposed compulsory redundancies and feared massive job cuts at all the sites.

He said Dundalk and Kilkenny both employed 125 people directly, while the St James's Gate workforce of 190 would be cut to 65. Up to 100 people will be employed at the new site.

"People were expecting change, but the actual announcement has shocked people," said Mr Mackell.

"There is no suggestion that the people at St James's Gate will be given preference at the new site."

Mr Walsh said he regretted the job cuts in Kilkenny and Dundalk, but the move was vital to sustain future development in a competitive market.

He said neither site was suitable for the size of the new brewing operation, while developing all work in a single site at St James's Gate was not feasible due to substantial operational and logistical difficulties.

Diageo said it would ensure that affected employees were offered relocation opportunities where possible. Where this was not possible, they would be offered a severance package alongside career counselling and support.

The company will enter formal consultations with employees on implementing the proposals.

The Labour Relations Commission has set aside the next nine months to hold talks between Diageo and four trade unions.

Mr Walsh said the Kilkenny and Dundalk breweries had played a critical role in the success of Diageo's beer brands in Ireland but did not have the scale necessary for sustained success in increasingly competitive market conditions.

Enterprise, Trade and Employment Minister Mary Coughlan, said the investment secured the future of brewing in Ireland.

She welcomed the retention of the St James's Gate brewery, which was of great historic significance to Dublin.