Celebrations in Scotland at the prospect of two new super-distilleries being built came with more than a dash of cold water yesterday when the multinational drinks giant Diageo took the opportunity to reignite the row over alcohol pricing.
As he unveiled a £1 billion investment over the next five years that will create more than 100 “high value” jobs in the company and a further 750 outside it, Diageo’s chief executive Paul Walsh attacked the Scottish and UK governments and their intentions to introduce minimum pricing for alcohol, which, he claims, will push up British prices of cheaper whiskies.
Mr Walsh said that Diageo remained opposed to the minimum pricing of alcohol now expected to become law in Scotland next spring, arguing there was no evidence it would curb excess alcohol abuse.
Scotch whisky distillers have argued that increasing the domestic price of alcohol may cause governments in key overseas markets to raise tariff barriers, harming exports. When it was put to him that Diageo’s huge expansion suggested the damage to exports would be minimal, he said: “Whatever growth we see with minimum pricing is going to be less than it would have been without it.”
He said that while he was sure legal advice had been taken on whether the new law could be challenged, he had not seen it and would consider whether legal action was appropriate when the policy looked likely to be implemented.
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“Whilst not supporting it, that cannot get in the way of our plans for Scotch,” he said, expressing scepticism that the policy would endure.
“I am also encouraged that there seems to be tacit approval that if this is put in place and it is seen not to have an impact, as I suggest it will not, people are talking about withdrawing it,” he said in reference to the Scottish government’s pledge to have a “sunset clause” included in the legislation.
Since the investment announced yesterday would take up to 12 years before matured malt whisky produced from it could be sold, he suggested the whole issue of mimimum pricing could turn out to be a “red herring”.
Diageo is also planning to expand several of its existing distilleries, adding further capacity which could boost production by 40 million litres a year, a 46 per cent increase in the 87 million litre malt whisky capacity the company is estimated to have had in 2010.
The £1 billion investment follows £600 million the company is reckoned to have spent in the past five years, including £40 million on a superdistillery at Roseisle, on Speyside, which opened in 2010. Mr Walsh said that, subject to planning permission, he hoped work would start soon on a ten million litre Roseisle-type distillery, with a second expected to follow in two to three years.
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Bryan Donaghey, managing director for Diageo Scotland, said the first new distillery site had been narrowed down to a choice between Glendullan and Inchgower, Speyside, and Teaninich, Alness, with big warehouse expansion committed in Fife and Clackmannanshire.
Controversy of the closure of the Johnnie Walker distillery in Kilmarnock and transfer of its production to Fife, which pitched the company into an angry dispute with Alex Salmond, had affected sales of the brand “not a bit”, Mr Walsh said. “One of the iconic brands in our stable, not only in the world of Scotch but in the world of spirits, has to be Johnnie Walker, with incredible global reach,” he said.
Charities enjoy sweet finish
A royal charity is set to receive a multimillion-pound boost from sales of a special Diamond Jubilee malt whisky created by Diageo to commemorate the Queen’s 60 years on the throne (Peter Jones writes).
Diageo filled a mere 60 silver and diamond-decorated designer decanters with the one-off whisky and put them on sale at £120,000 each. “We were over-subscribed,” Paul Walsh, Diageo chief executive, said yesterday.
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The total value realised is £7.2 million and, Mr Walsh said, once tax and costs are paid, profits from the royal limited edition will go to the Queen Elizabeth Scholarship Trust, which aims to assist traditional craftsmanship.