Diageo to invest £1bn in Scotland’s whisky industry

The drinks giant Diageo, owner of Johnnie Walker and Bell’s whisky, is to spend around £1bn on substantially increasing its whisky production to exploit a sharp surge in global demand for Scotch.

The London-based firm has announced that it would build a new malt distillery, expand its existing whisky distilleries and greatly increase its bottling capacity to cope with the increase in worldwide sales, as part of a five-year expansion strategy.

Scotch whisky and malt whisky have seen a significant increase in sales worldwide, raising anxieties that the industry may be unable to keep pace with demand, leading to temporary shortages and price rises.

It is now Scotland’s largest export, with Diageo reporting a 50% growth in overall net sales of its Scotch whiskies and malts over the last five years both within the UK and abroad, taking total sales to £3bn and producing a third of its gross profits last year.

Johnnie Walker, known for its black label and red label blends, is the world’s top-selling Scotch, with Diageo shifting nearly 18m cases worldwide in the year to June 2011. Its other leading brand, J&B, is the fourth highest-selling Scotch, with 4.6m cases sold in the same period.

Earlier this year the Scotch Whisky Association revealed that total exports had broken through £4bn a year, reaching £4.2bn, and said it had become the drink of choice for middle classes in emerging economies of China, south Asia and South America.

Around half of that £1bn anticipated investment will be tied up in the cash value of the whisky being matured for future sale and blending: it estimates that it will need £500m in working capital to cover that stock over the next five years.

The remaining £500m will be invested in the new distillery facilities, construction and on hiring a further 100 staff, many of whom would be apprentices. Diageo said that spending would see a further 250 construction jobs each year until 2017, with a further 500 jobs created elsewhere in the economy.

Paul Walsh, the firm’s chief executive, said: “This is a pivotal moment in the development of the Scotch whisky category for Diageo. Over recent years our brands have achieved remarkable, sustained global growth. Scotch whisky is Scotland’s most celebrated manufactured export, led by brands like Johnnie Walker, resonating with consumers from Boston to Beijing.

“We expect that success to continue, particularly in the high growth markets around the world, which is why we are announcing this major investment in Scotch whisky production, committing over £1bn in the next five years, to seize that opportunity for global growth.”…..

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