Diageo plans £1 billion Scotch investment

Diageo is to create jobs and build a new malt distillery as part of a £1 billion investment in Scotch whisky production over the next five years to meet growing global demand for its brands.

A major new malt distillery in Speyside or the Highlands will be built as part of the investment and the company will also draw up plans for a second if Scotch continues its global growth.

New warehousing capacity to house the millions of additional litres of Scotch whisky is also planned.

In the last five years Diageo has reported 50% growth in net sales of its Scotch brands with total net sales approaching £3billion this financial year. Scotch represented 23% of Diageo’s volume, 27% of net sales and a third of gross profit in the financial year 2011. In the first half of financial year 2012, Diageo’s Scotch category saw 8% volume growth and 14% net sales growth.

Announcing the investment Diageo chief executive, Paul Walsh 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. This builds on the foundations we have already laid down over recent years through sustained investment in both production assets and in maturing Scotch inventories.

“Scotch whisky is a significant manufacturing export industry in the United Kingdom, driving domestic investment and job creation through our success in exporting to high growth markets around the world. We look forward to working with both the UK and Scottish governments to realise the full potential of our investment plan, and to continue growing global Scotch exports.”

Over the five year period Diageo plans to invest over £500 million in the construction of the distillation and warehousing capacity. This increased production capacity also requires Diageo to commit £500million in working capital for the maturing spirit which will be laid down over the next five years.

Both the Scottish government and the Scotland office welcomed the news, saying it underlined the Scotch whisky industry’s commercial success.