Diageo throws weight behind American whiskey

Diageo’s strategy to expand its American whiskey footprint will take a leap forward next week as the group breaks ground on a new US$115m distillery in Shelby County, Kentucky.

Diageo’s new Kentucky distillery will be used to produce Bulleit Bourbon, as well as other American whiskeys

The distillery, which is due for completion in 2016, will have capacity to produce 750,000 nine-litre cases of Bulleit and other Bourbon and North American whiskeys a year.

Bulleit Bourbon is currently produced at the Four Roses Distillery in Lawrenceburg, Kentucky.

An additional six maturation warehouses will be built on the 300-acre site with a total storage capacity for 330,000 barrels.

The turning of the sod ceremony is expected to be attended by Kentucky governor Steve Beshear, Diageo North America president Larry Schwartz and Tom Bulleit, founder of Bulleit Distilling Co.

American whiskey is set to become a major focus for Diageo as it works to increase its share of the market with Bulleit, George Dickel, the Orphan Barrel whiskey programme and additional, future brands.

At its full-year financial results, group CEO Ivan Menezes said to expect George Dickel to increase its presence in the market and that further brands will be introduced in the next 12 months. “We’ve announced a major investment in distilling capacity in Kentucky; that will continue,” he said.

“We have this lovely Tennessee whisky called George Dickel which we are getting behind, and I think that has enormous runway ahead. Orphan Barrel, we run out every time we produce it, you can find it on eBay. It’s doing extremely well and we’ve got a new edition of it coming out. But we’ve also got additional place, which you’ll see in fiscal ’15 that we will bring into the American whisky space. So I feel very confident about our position and prospects in American whisky.”

“You’ll see a lot more of George Dickel too”

Menezes added that the push behind George Dickel will be focused on the US at first as it’s a brand that “you don’t build with big splashes of advertising, you build them the right way and you’ve got to build them in the on-premise”.

Diageo has recently launched a “by the barrel” programme for George Dickel to raise its profile among bartenders.

The drive behind the category comes as analysts warned Diageo its focus on “highly competitive” vodka brands rather than American whiskey – the States’ fastest growing category – could lead to “continued share losses”.

The British drinks group currently has a 21% share of North American whiskey in the US, driven by Bulleit Bourbon and Rye, which grew by 69% in 2013/14 to sell 600,000 cases globally.

Menezes added that Crown Royal, despite being a Canadian whisky, is a big part of Diageo’s North American whiskey strategy in the US despite recording slim 1% organic sales growth during 2013/14. The majority of US consumers view it as American.

Sales of Bourbon and Tennessee whiskey grew by 6.8% in 2013, according to the Distilled Spirits Council of the US (Discus).