Diageo spends £1bn on distilleries to grow emerging markets share

By PETER RANSCOMBE
Published on 07/06/2012 06:04

SCOTLAND’S largest whisky maker yesterday named three sites for two new distilleries as it unveiled a £1 billion investment to keep up with the thirst for Scotch in emerging markets.

Diageo – owner of Bell’s, J&B and Johnnie Walker – is running the rule over locations at Glendullan, near Dufftown, Inchgower, at Buckie, and Teaninich, near Alness, for the pair of giant distilleries, each of which will equal the size of the £40 million Roseisle plant opened two years ago.

Chief executive Paul Walsh said he expected the firm to announce further investments as Diageo keeps up with growing demand from Brazil, China and other fast-growing markets.

Scotch exports grew by 23 per cent in 2011 to £4.2bn, with the Brazilian market leaping 48 per cent, and Singapore, which acts as a distribution hub for much of Asia, rising 44 per cent. Johnnie Walker, the world’s best-selling blended whisky, grew sales by 15 per cent.

Walsh said he will increase production at the firm’s existing 28 malt whisky distilleries by 50 per cent – with growth mainly focused on the Speyside region – and will build nearly 50 warehouses, including up to nine at its existing site at Blackgrange, near Alloa, and the remainder at a virgin site at Begg Farm, near Kirkcaldy in Fife.

He added: “Scotch is at the heart of the Diageo business and accounts for about one-third of our total sales in the spirits category. This investment is a sign of how confident we are in the growth in demand for Scotch in the decades ahead.”

Walsh added that “consumers from Boston to Beijing” had developed a taste and hailed the growth as “a pivotal moment in the development of Scotch whisky”.

He expects to create 100 jobs within the firm with the five-year investment programme and a further 500 indirectly in the wider economy, including about 250 construction roles. Diageo also aims to hire about 100 apprentices.

About £500m of the investment will be made in casks, distilleries and warehousing, with the remaining £500m being spent on the production and maturation of the Scotch itself.

Bryan Donaghey, managing director of Diageo Scotland, added that some of the cash would also be spent on developing renewable energy projects on the sites, similar to the bio-energy plant opened next to Roseisle. Diageo courted controversy in 2009 by closing its historic Johnnie Walker bottling plant and a grain distillery in Glasgow, with the loss of 900 jobs. The company shifted bottling to its site at Leven, in Fife, creating 400 roles.

Donaghey said the firm will open a bottling line for its high-end brands – which include its King George V and John Walker bottlings – over the summer at Leven, in Fife.

French drinks giant Pernod Ricard – owner of Diageo’s arch rival, Chivas Brothers– last week unveiled plans to open a similar “premium” bottling line in Paisley. It also rolled out plans to expand its Scotch production by 25 per cent by reopening its Glen Keith distillery in the spring and boosting output from four of its other distilleries.