Diageo the ‘Big Daddy’ of the Scottish whisky industry has committed to spending £1 Billion over the next 5 years in its Scottish Whisky Infrastructure including building a new scotch whisky distillery most likely in Speyside. Included in the plan is to build more storage warehouses and the expansion of at least half of the 28 scotch whisky distilleries already owned by Diageo. The scheme could create 250 jobs each year in construction and the investment will provide another 500 spin off jobs in Scotland’s ailing economy. This is welcome news for the Scottish Government and John Swinney the Scottish Finance secretary said “The investment in new distilleries and warehousing capacity is a vivid illustration of the positive and optimistic outlook for demand in the sector. The Scottish government recognises the key role of the Scotch whisky industry in our food and drink strategy and we look forward to working constructively with Diageo to take forward their investment plans in Scotland.”
This is in stark contrast to when Diageo took the decision to move the production of Johnnie Walker Whisky from its historic home of Kilmarnock to the East coast of Scotland for cost savings. At that time the leader of Scotland’s government Alex Salmond led protests against Diageo through the streets of Kilmarnock. How times change.
Diageo owns many of the big brands you will find in bars around the globe including Johnnie Walker, Smirnoff, J & B, and Guinness. However it is scotch sales which is growing Diageo’s coffers with their Scotch whisky brands growing at 50% over 5 years. This largely due to the growth in emerging markets rather than any improving sales in the UK market.
The Chief Executive of Diageo Paul Walsh stated: “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.”
This is not an easy decision for Diageo as they are trying to predict consumption in 10 to 20 years’ time as the maturation of whisky is a lengthy business. Boom and Bust exists in the whisky industry as well and Paul Walsh will be only too aware of the Pattison crash in the early part of the 20th century when the whisky bubble burst with dire consequences.
It is estimated that consumption in emerging countries will take over that of developed nations in the coming year.