Last week Diageo issued a press release sure to warm the hearts of many (or at least the readers of this blog): “[T]he world’s leading premium drinks business has unveiled plans to invest over £1 billion in Scotch whisky production over the next five years to meet growing global demand for its brands.” Specifically:
A major new malt distillery will be built as part of the investment, alongside a programme of major expansion at a number of Diageo’s existing distilleries. Detailed plans will also be developed for a second new distillery which will be built if global demand for Scotch is sustained at expected levels.
The company also plans to invest in substantial new warehousing capacity to house the millions of additional litres of Scotch whisky which the distillation investment will produce.
That translates to more than $1.5 billion—an awfully large investment and, some might say, a risky gamble considering global economic uncertainties. Except that even through the last several years, sales of Scotch have risen dramatically. As the Wall Street Journal reports:
Diageo has seen a 50 percent sales increase in Scotch over the past five years, with annual sales now approaching £3 billion, or around $4.6 billion. That represents nearly a third of the £9.9 billion total sales the company posted in 2011.
Diageo CEO Paul Walsh tells the Journal, “The numbers are staggering. In these new high-growth markets, there are two billion consumers who in the next 20 years will be able to afford our brands.” These markets include Asia, Latin America, and Africa. Of course the United States is still the largest importer of Scotch, followed by France, which sells more whisky in one month than it does cognac in an entire year. The third-largest importer of Scotch is Spain (lately, they’ve got many reasons to drink). Not that we all drink Scotch the same way: As the Journal‘s William Lyons points out, “In places like China, they drink it with green tea and, of course, in Spain, they mix it with coke as well.”