Diageo investing $1.55 bln to expand Scotch output

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LONDON (AP) — Diageo PLC, the world's largest drinks company, announced plans on Monday to invest 1 billion pounds ($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 percent of the company's Scotch production is exported. Sales have grown by 50 percent in the past five years and will be worth about 3 billion pounds 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 pounds in sales last year, according to the Scotch Whisky Association.

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

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 stabilizing, the industry should sustain at least plus-3 percent volume growth per annum for a decade."

Diageo shares were up 1.6 percent at 1,540 pence in morning trading in London.

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