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Diageo To Pour $1.54B Into Scotch Production

June 6, 2012

Days after top global rival Pernod Ricard announced a number of upgrades to its Scotch whisky production capacity, Diageo says it’s set to invest $1.54 billion in its own Scotch operations over the next five years. That layout will cover a new malt distillery and warehousing in locations yet to be determined, in addition to an expansion of Diageo’s existing Scottish facilities.

Diageo’s new Scottish investment is part of the continuing evolution of its operations in the country. In recent years it closed its distillery in Port Dundas and a packaging plant in Kilmarnock, while increasing its capacity in Speyside and unveiling a new $65-million distillery in Roseisle.

Diageo CEO Paul Walsh said the latest move was a “major investment” aimed toward meeting rising demand for the company’s Johnnie Walker, Windsor, J&B and Bell’s Scotch brands, especially in emerging markets such as China and Brazil (the latter could overtake the U.S. and travel retail to become Johnnie Walker’s largest market by year-end). Diageo expects emerging markets to account for half of total company sales by 2015, up from 40% currently.

Johnnie Walker, the world’s top-selling spirits brand by value, was worth $5.24 billion at retail last year on global volume up 11% to 18 million cases, according to Impact Databank. By comparison, Pernod Ricard’s top two Scotch brands, Chivas Regal and Ballantine’s, combined for sales of $3.24 billion in 2011. Pernod, with a 50% share of China’s burgeoning Scotch sector, still claims an edge over Diageo’s 37% share in that market. But Diageo has narrowed the gap of late via rising sales of Johnnie Walker and Windsor, gaining 7 percentage points in the segment over the last five years.

 

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