Diageo announces multi-million upgrade for Caol Ila

Drinks giant Diageo is to invest millions of pounds boosting the production of whisky at Islay's largest distillery.

The company is to spend 3.5 million upgrading the centuries old Caol Ila distillery on the Sound of Islay.

It is hoped the money, to be spent on upgrading and replacing equipment at the site, will increase its production of Scotch by 700,000 litres a year.

The distillery, founded in 1846, currently produces 5.7 million litres of whisky every year, most of which is used in Diageo's blended whisky brands.

The work is expected to take six months and is due to start in June.

The company said the money would be a "major boost" to local firms and generate a knock-on financial benefit to the local economy from contractors who will have to be brought on to the island to carry out aspects of the work.

Kevin Sutherland, Diageo's senior site manager on Islay, said: "An investment of this scale is fantastic for the local economy and it signals Diageo's deep-rooted commitment to the Islay whisky industry.

"Caol Ila is a wonderful distillery of which we are very proud and I am delighted we are going to be able to produce even more fantastic single malt as well as contributing to the growth of Johnnie Walker and Diageo's other leading global Scotch brands."

The company has already spent 600 million over the past six fiscal years on its Scotch whisky operations, including the opening of the 40 million Roseisle distillery on Speyside last year - the first major malt whisky distillery to be built in Scotland in over 30 years.

But the company have also announced 700 job losses at its Port Dundas distillery in Glasgow and a packaging plant in Kilmarnock.

It announced in July last year it will shut the sites by 2011, marking the end of nearly 200 years of distilling in Port Dundas.

The controversial "restructuring" was designed to save Diageo 40 million a year.