Scotch infrastructure

12 July, 2012

Asian demand for whisky has boosted investment in Scotland, says Lucy Britner


ASIA, ASIA, ASIA. That’s all we read about these days. A headline from UK newspaper The Guardian reads: “Exports galore – sales of scotch to Asia rise so fast that supplies may run short”. Scottish newspaper Herald Scotland went with: “Asian boom fuels distiller’s earnings.” You get the idea.

So sales are flying, the luxury end is up and emerging middle classes are splashing the cash in the bars and shops. But what does it all mean on the ground in Scotland? How does a luxuriously packaged bottle, costing hundreds of pounds, on the table of a glamorous bar in Hong Kong, translate to warehouses and cooperages down single track roads in chilly Scotland?

Infrastructure is the answer. Companies are investing heavily in bigger, better, faster bottling lines, sustainable distilleries and new cooperages.

Most recently, Diageo announced the opening of a £10m ($15.5m) cooperage in Cambus. The site is near Blackgrange – a facility that warehouses some 3 million of Diageo’s 7 million casks in Scotland.

The new cooperage looks like a car manufacturing plant – not surprising considering the company worked with UK-based engineering firm CI Logistics, which works primarily in the automotive industry. Together they custom-designed a series of mechanical conveyors to move the casks – which weigh up to 85kg when empty. The skill of the cooper remains utilised, but the heavy work is no longer a factor.

The cooperage will turn out approximately 250,000 casks each year.

That’s not all. The company has also been granted planning permission to expand bottling facilities. Diageo is to spend £5m on a bottling line in Leven which is to focus on luxury products. It would be fair to link this development to the company’s performance outlined in Diageo’s most recent annual results (published in August 2011). The results read: “Diageo’s growth in Asia Pacific was driven by scotch, in particular the super deluxe segment in emerging markets; Johnnie Walker also saw an increase of 16% in volume and 12% in net sales.

“In Korea, Diageo outperformed a declining scotch market with Windsor 12 extending its leadership position, and in China, Diageo’s scotch brands gained share in the standard, deluxe and especially the super deluxe segment where incremental marketing spend drove 41% net sales growth in the whisky segment.”

John Paterson, site director at Leven said: “We were granted planning permission in early October to expand our bottling facilities. This work is part of our overall restructuring plans that will ensure the long-term sustainability of our operations in Scotland. It builds on the £86m already invested in the site alongside the creation of some additional 400 full-time equivalent jobs. It represents a further £5m investment and also a number of additional jobs will be created. Construction has commenced and is due to be completed in the summer of 2012.”

Money pours into premium spirits

Diageo isn’t the only company splashing the big bucks in Scotland to provide for the Asian boom. Chivas Brothers – the premium gin and scotch whisky arm of Pernod Ricard – has spent tens of millions of pounds.

Christian Porta, chairman and CEO of Chivas Brothers, said: “On average we invest up to £40m a year in our operations facilities. On top of the £10m investment in distilling capacity at The Glenlivet in 2010, there has been significant investment across both our bottling sites in new machinery to improve efficiency and quality.”

Porta talked about the company’s high aged and limited edition products and said the company is in a “strong position to deliver” against this demand in Asia with its Chivas Regal, Ballantine’s and Royal Salute brands.

Porta said Chivas has introduced “at least five” permanent lines aged from 15 to 45 years old in the past five years as well as “strongly growing” its existing portfolio of luxury aged scotch whiskies.

He added: “The commercial success of permanent products such as Royal Salute 62 Gun Salute at $2,500 (£1,608) in duty free has certainly demonstrated the demand is there.”

Clearly both drinks companies were Scouts and remember the motto: “Be prepared.”





Comment

Christian Davis

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