Diageo to build a USD 115 million distillery in Kentucky
A new destination on the Bourbon Trail: The world’s number one drinks group Diageo plans to build a new distillery in Shelby County, northern Kentucky, media reported on 30 May 2014. Finalization of the plans is still subject to approval by local government, though.
If approved, this will represent an investment of USD 115 million (EUR 85 million) over the next three years. The distillery, which is to be fully operational by 2016, will have a capacity of 1.8 million proof gallons, or 750,000 nine-litre cases, and will distil bourbon and other whiskies.
The announcement comes as bourbon, most of which is made in Kentucky, continues to boom. Bourbon is currently the fastest growing spirits category in the U.S. retail sector, enjoying 14 percent value growth for the latest 52 weeks (to 26 April 2014) according to IRI. This popularity is mirrored globally, with the super-premium price segment growing 24 percent between 2009 and 2012, says IWSR.
Up until now, Diageo has had no active distillery in Kentucky, although the company owns the historic Stitzel-Weller plant in Louisville, which is currently being turned into a USD 2 million tourist attraction.
With the Shelby County distillery, Diageo will begin making its own bourbon; to date, the company has only marketed bourbon distilled by others, including the popular “Bulleit” brand and “Orphan Barrel” series.
Whether the production of Bulleit – widely rumoured to be made at the Four Roses Distillery in Lawrenceburg, Kentucky, which was bought by Kirin in 2002 – will move to the new distillery, Diageo would not say.
Media say the project will represent a significant investment in Kentucky’s growing bourbon industry. The company expects that the construction project will provide about 30 jobs in whiskey distillation and maturation.
Local authorities are suitably grateful that Diageo chose Kentucky. It was reported that the Kentucky Economic Development Finance Authority (KEDFA) gave preliminary approval for USD 4 million in tax incentives for Diageo’s project, including USD 2.5 million in performance-based corporate income tax credits and wage assessments. The company also is eligible for an additional USD 1.5 million in Kentucky sales and use taxes on construction costs, building fixtures, equipment used in research and development and electronic processing equipment.
According to KEDFA’s report, Diageo will spend USD 2 million on the real estate, USD 94.3 million on the distillery, USD 12.4 million on equipment, and USD 6.3 million on other start-up costs.
Apart from Bulleit bourbon and Bulleit Rye, Diageo’s North American whiskey portfolio includes the George Dickel brand, which is made in neighbouring Tennessee, and the Crown Royal and Seven Crown brands. Diageo also owns Johnny Walker, J&B and Buchanan’s scotches; Bushmills Irish whiskey; Smirnoff, Cîroc and Ketel One vodkas; Baileys liqueur; Captain Morgan rum; Tanqueray gin; Guinness beer and Beaulieu Vineyard and Sterling Vineyards wines.
