Diageo puts brakes on Scotch whisky expansion

31-Oct-2014 - Last updated on 31-Oct-2014 at 15:18 GMT

Slow in the exports of Scotch

Weakening global demand for Scotch whisky could put the brakes on Diageo’s plans to upgrade its northern distilleries as part of the business’s £1bn expansion plan announced in 2007.

The alcoholic beverages giant, which distils brands Johnnie Walker, Windsor and Buchanan’s, said the weaker economic climate had impacted the growth of Scotch in certain markets.

Expansion plans for the Clynelish Distillery, Diageo’s most northern distillery, could be worst affected, local press reports have suggested.

Pump £30M into distillery

In January this year, the company announced plans to pump £30M into the distillery, which would have doubled the site’s total output, it said.

However, a Diageo spokesman refused to disclose plans for individual sites but told FoodManufacture.co.uk the company was currently looking at the timing of its investment strategy.

“Diageo will continue to review and adjust the timing of the next phase of our investment programme to manage our Scotch whisky inventory and to retain the alignment between growth in production volumes and growth in demand,” the spokesman said.

“Our long-term investments are naturally planned in phases to give us the ability to adjust to fluctuations in demand and to ensure the right balance between supply and demand.”

Exports of Scotch down

The announcement followed recent figures from the Scotch Whisky Association (SWA) that showed exports of Scotch in the first half of this year were £1.77bn, down from £1.99bn in the same period last year.

“Following a decade of fast growth, the demand for Scotch is levelling off in some markets,” said David Frost, SWA ceo.

A decline in exports to Asia, the US, China, Brazil and Singapore had caused the most damage to the sector’s performance, the figures showed.

The figures should act as a reminder that the success of Scotch whisky can’t be taken for granted and that the sector needed government support to break into new markets, Frost added.

“However, there is confidence in the long-term future of Scotch, with many projects for new distilleries underway, and up to £2bn of capital investment in Scotland committed by producers,” he claimed.

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