£1bn whisky investment by Diageo boosts jobs

Guinness to Smirnoff owner Diageo today unveiled plans to invest £1 billion in Scotch whisky production over the next five years in a move that will create nearly 1,000 jobs.

Diageo, which produces Scotch brands Bells, J&B and Johnnie Walker among others, said it plans to build a major new distillery and expand a number of its existing 28 distilleries. The company will also create new warehouse space under the plans.

The group said the proposals would create 100 Diageo jobs, around 250 construction roles and up to 500 positions from the "knock-on effect" on the Scottish economy.

Diageo chief executive Paul Walsh said: "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."

Diageo said it also hopes to build a second new distillery, if global demand for Scotch is sustained at expected levels.

The group was unable to confirm specific locations for the new facilities but it is understood to be looking in the Speyside and Highlands area and planning applications should be lodged later this summer.

Scotch is the principal growth category for Diageo and represents 23% of the group's sales volumes and 27% of net sales value.

It shipped 17.8 million cases of Johnnie Walker in the year to June 30 2011, 4.6 million cases of J&B and 1.5 million cases of Buchanan's.

A number of emerging markets are driving the growth in Asia, Africa, Latin America and Eastern Europe, while there are still opportunities in developed markets including the US.

Diageo said it intends to make its contribution to efforts to tackle youth unemployment by taking on around 100 apprentices and graduate trainees over the term of the investment.

Mr Walsh added: "I'm particularly pleased our investment will generate significant numbers of new Diageo jobs, as well as boosting the local construction sector and stimulating job creation throughout the Scottish economy."

Diageo reported 50% growth in net sales of its Scotch brands with total net sales approaching £3 billion this financial year.

The group plans to invest more than £500 million in the construction of the distillation and warehousing capacity over the five years, which will also require £500 million in working capital for the maturing spirit.

Supporting this investment, Diageo also plans to commit £5 million over five years towards community initiatives as part of its sustainability and responsibility programme in Scotland.

Investors appeared to back the move with Diageo shares rising nearly 2% in early trading.

Chris Pitcher, partner and beverages and tobacco analyst at brokers Redburn, said: "This year we forecast that Scotch consumption in the emerging markets will be greater than in the developed world. This is an important inflection point which highlights the broad-based appeal the product has achieved."

He added: "Diageo is well-positioned to capture more than its share of this opportunity."

PA