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Diageo investing US$1.55b to expand Scotch whisky output

Published:Friday | June 8, 2012 | 12:00 AM

Diageo PLC, the world's largest drinks company, announced plans on Monday to invest £1 billion (US$1.55 billion) to expand production of Scotch whisky.

Diageo, whose Scotch brands include Bells, J&B and Johnnie Walker, said Wednesday that it plans to build a major new distillery and expand several of its existing 28 distilleries.

About 85 per cent of the company's Scotch production is exported. Sales have grown by 50 per cent in the past five years and will be worth about £3 billion this year, the company said.

"Scotch whisky is Scotland's most celebrated manufactured export, led by brands like Johnnie Walker, resonating with consumers from Boston to Beijing," said Paul Walsh, Diageo's chief executive.

Diageo accounts for the largest share of Scotland's whisky output, which hit a record £4.2 billion in sales last year, according to the Scotch Whisky Association.

The United States was the No. 1 export market, with sales up 31 per cent to £655 million. France was second, up 27 per cent to £535 million, and Singapore was third with £318 million of sales, up 44 per cent.

Analysts at Redburn Partners said 2012 is likely to be the first year when emerging markets account for more than half of Scotch exports, with India and Brazil as key buyers.

"What is attractive is Scotch's broad-based acceptance by the emerging middle classes from all regions," the analysts said in a research note.

"With the US, Japan and Europe now stabilising, the industry should sustain at least three per cent volume growth per annum for a decade."

- AP