Leading brewer, Diageo plc (DEO), has announced that it will pump in £30 million ($49 million) to expand the Clynelish Scotch Distillery located in Sutherland town of Brora, Highland Council.
Per the plan, Diageo will install a mashtun (vessel for soaking the malted barley), 10 washbacks (vessels for the fermentation process) and six copper stills in the distillery. The expansion is expected to effectively double the distillery’s production capacity. It will be powered by a bio-energy plant expected to come up shortly.
Clynelish Distillery produces single malt whisky used in Scotch whisky brands such as Johnnie Walker. The distillery is also one of Diageo’s 12 distillery visitor centers, and has more than 5,000 visitors each year.
With this expansion plan Diageo’s total investment in the Highland Council region amounts to £150 million ($246.04 million). Apart from the expansion plan at Clynelish Diageo has recently undertaken £25 million ($41 million) expansion plan in the Glen Ord Distillery, to double the production capacity. Diageo also plans to increase the capacity at Teaninich Distilleries by two folds and build a new distillery at Alness.
The expansion is part of Diageo’s plan to invest £1 billion ($1.64 billion) to increase Scotch whisky production announced in fiscal 2012. Diageo is a leader in the whiskey category and it has strengthened the segment by expanding its existing whiskey production facilities in the region and also plans to open newer locations during the year.
Diageo has strong potential to grow its Scotch businesswhich is a growing sector in the whiskey industry. In Russia, the Scotch sector has been growing in double digits for the past several quarters and the growing population in the region is expected to further boost the business in the coming years. In China too, Diageo foresees a bright future for Scotch. The company has recorded high single-digit growth in the region for the last four half-yearly results.
Currently, Diageo carries a Zacks Rank #3 (Hold). Another better-ranked stock in the same sector is Constellation Brands Inc. (STZ) sporting a Zacks Rank #1 (Strong Buy). Other stocks in the consumer staples sector worth considering are Green Mountain Coffee Roasters Inc. (GMCR) and ConAgra Foods Inc. (CAG) carrying a Zacks Rank #2 (Buy).
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