London, June 6 (Reuters): Diageo Plc, the largest producer of Scotch whisky, will invest over £1 billion in the drink over the next five years to meet growing demand from the emerging markets of Asia, Latin America and Africa.
Rivals are also expanding, with the world’s second-biggest Scotch producer Pernod Ricard unveiling a £40-million investment last week at its malt distilleries to boost supplies of its top sellers such as Ballantine’s and Chivas Regal.
Diageo, which makes Johnnie Walker, J&B and Bells whisky and has around a third of the market, said it was seeing strong growth in BRIC markets — Brazil, Russia, India and China — and beyond, as drinkers worldwide acquire a taste for the Scottish tipple.
“We are looking beyond the BRIC countries and while not as large as the BRICs there are huge opportunities in countries such as Colombia, Vietnam and Indonesia which are large markets with emerging middle classes,” chief executive Paul Walsh said.
The British company plans to build a new malt distillery, expand a number of existing ones, develop plans for a second new distillery and a possible third if the 10 per cent-plus annual sales growth of recent years is sustained for the next three or four.
“If Scotch delivers as forecast, Diageo will enter a new era of above-trend growth,” Redburn analyst Chris Pitcher said.
Diageo’s Scotch whisky sales have risen 50 per cent over the last five years to nearly £3 billion last year, creating a third of group profit. In the last half of 2011, the Scotch market saw volumes grow 8 per cent and sales 14 per cent.
Set to expand
Walsh said three existing sites had been identified for the first new distillery including Inchgower, Glendullan and Teaninich in Scotland, while nearly half of its exiting 28 malt distilleries were set to expand.
The new distillery will have the same production of Diageo’s Roseilse distillery in Speyside of 10 million litres of alcohol a year, which when it opened in 2010 was the first new malt distillery to open for over 30 years and also the biggest.