Diageo Announces New Distillery in KY

[risenc]

Well, this is huge:

Diageo Announces Intention to Invest an Estimated $115 Million to Build Distillery

in Shelby County, Kentucky

Investment signals commitment to high-growth North American Whiskey category

SHELBY COUNTY, Ky., May 29, 2014 – Diageo today announced its intention to invest an estimated $115 million over three years to build a 1.8 million proof gallon (750,000 9-liter cases) distillery and six barrel storage warehouses in Shelby County, Kentucky. While finalization of these plans is still subject to approval by local government, the project will represent a significant investment in Kentucky’s growing bourbon industry. The proposed facility will distill a number of current and future Diageo bourbon and North American Whiskey brands.

Diageo will purchase approximately 300 acres of property located on Benson Pike in Shelby County. The company expects that the construction project will provide a significant number of jobs and anticipates employing approximately 30 people for whiskey distillation and maturation.

“This proposed investment in Shelby County, in the heart of Kentucky bourbon country, will cement our commitment to expanding our share of the American whiskey category,†said Larry Schwartz, President, Diageo North America. “Diageo has a long tradition within the craft of whiskey-making and we look forward to bringing this artisanship to the new distillery. The distillery will build on our presence in Kentucky and we are committed to being a productive member of the local community. We are very thankful for the support we have received thus far from state and local officials and look forward to a long and fruitful working relationship.â€

“Today marks another feather in the cap for Kentucky’s bourbon industry,†said Governor Steve Beshear. “Distilled spirits remain a marquee industry in the Commonwealth, and Diageo’s new distillery will ensure that even more Kentucky bourbon is enjoyed around the globe. I want to thank Diageo for investing in Shelby County, and I look forward to seeing the distillery in action.â€

“The Shelby County Fiscal Court is very excited that Diageo is proposing to expand its worldwide distillation operations by building a state-of-the-art distillery in Shelby County. We look forward to a great partnership with Diageo and we welcome them to the community,†said Shelby County Judge-Executive Rob Rothenburger.

“This is a fantastic investment for Shelby County. It further solidifies our community as one of the fastest growing and business friendly areas in Kentucky,†said State Senator Paul Hornback (District-20). “We are thankful for the positive economic impact this will bring and are proud that bourbon, a signature industry of Kentucky, will now be made right here in Shelby County.â€

“Diageo is a name known around the world for their large portfolio of leading spirits brands and we are grateful that they have chosen Shelby County as the home base for their distilling operations in Kentucky. This $115 million investment in the community will benefit our citizens for years to come. I look forward to working with Diageo as their Kentucky bourbon operations grow and I welcome them to this district,†said State Representative Brad Montell (District-58).

“We couldn’t be more thrilled for the company and the Shelby County community, as this major distilling center will bring jobs and increased investment to the region,†said Eric Gregory, President of the Kentucky Distillers’ Association, of which Diageo is a long-time member. “We applaud Diageo for its continued commitment to Kentucky and our signature Bourbon industry, and look forward to toasting this incredible landmark at its opening.â€

Over the last year, Diageo’s momentum in North American Whiskey has accelerated with both flagship and new-to-world brands. Fuelled by flavor innovations and consumer demand for premium brands with authenticity, bourbon is currently the fastest growing spirits category in the U.S., enjoying 14% value growth for the latest 52 weeks^[1]. This popularity is mirrored globally, with the super-premium price segment growing 24% over the last three years^[2].

The proposed distillery will be designed to fit in with the surrounding countryside and during construction, Diageo will take measures to conserve the natural landscape in the area. Approximately 100 acres of land around the property line will act as a natural barrier to site operations. Diageo North America has a strong record of achieving zero waste to landfill in its operations, and the company aims to achieve the same in Kentucky. Diageo also plans to collaborate with the local community for the recycling and reuse of materials generated from the proposed facility.

Diageo announced in February that it will be opening a Visitor Center at its legendary Stitzel-Weller Distillery in Louisville. Diageo hopes that the Stitzel-Weller Visitor Center will soon be included on the Kentucky Bourbon Trail® tour.

On June 10, Diageo will hold an Open House to discuss the plans for the proposed Shelby County distillery, answer questions and hear from members of the public from 2:00 to 7:00 pm at the Shelbyville Country Club, 47 Smithfield Road, Shelbyville, Kentucky. A public hearing will be held on June 17 at 6:30 pm at the Stratton Community Center, 215 Washington Street, Shelbyville, Kentucky. Diageo hopes to receive approvals and to break ground in the coming months with the goal of having the distillery operational in late 2016.

About Diageo

Diageo (Dee-AH-Gee-O) is the world's leading premium drinks business with an outstanding collection of beverage alcohol brands across spirits, beer and wine. These brands include Johnnie Walker, Crown Royal, Bulleit, George Dickel, Buchanan’s and Bushmills whiskies, Smirnoff, Cîroc and Ketel One vodkas, Baileys, Captain Morgan, Tanqueray, Guinness, Beaulieu Vineyard and Sterling Vineyards Wines.

Diageo is a global company, with its products sold in more than 180 countries around the world. The company is listed on both the New York Stock Exchange (DEO) and the London Stock Exchange (DGE). For more information about Diageo, its people, brands, and performance, visit us at Diageo.com. For our global resource that promotes responsible drinking through the sharing of best practice tools, information and initiatives, visit DRINKiQ.com.

[bourboNcigars]

I'm really happy for the people in the area, having that money come in and it will create a ton of jobs..I'm really excited to see what comes out of there

[ModernThirst]

My house is in Jefferson County, about 2 miles form the border of Shelby County. this could be either awesome for me, or it could kill me.

[zillah]

It is nice to see Diageo finally starting to invest in creating American Whiskey.

[BAO]

Bring on the glut

[sutton]

I suppose this will finally put to rest the speculation of reviving distillation at S-W - must have proven too expensive/impractical than starting a completely new site.

[bourboNcigars]

I wonder if when digging the site for the building they will magically uncover 100 barrels of 50y bourbon that was buried there and name it something like LUCKY #1..lol that's just me taking a shot at the orphan barrel story lol

[Gillman]

Now they're not just a scotch company.

Gary

[kcgumbohead]

I wonder just how much $$ it would have cost to resurrect S-W if this route turned out to be the better deal.

[Gillman]

That was my thought too, I'd guess there were EHS (environmental, health and safety) issues with S-W, e.g., the asbestos we've heard of, and perhaps local zoning or emissions laws changed. Probably they got a better incentives deal in Shelby County too. Also, the existing space may not have been big enough, distillery design to today's standards and sophistication probably merits a fresh approach. You have to admire the long-term view this kind of company takes and the financial wherewithal it has to support it. Probably, some of the people planning it will retire before some of the bourbon is ready to ship but they take the long view as big sophisticated companies do.

Gary

Edited May 29, 2014 by Gillman

[ModernThirst]

S-W has a huge reputation in the bourbon community, but by-and-large, the common tourist probably knows little about it. The rural character of Shelby County is probably more in line with what most tourists expect when on the bourbon trail, as opposed to Shively, where no matter what you do to spruce up the distillery, you're still in Shively. while it's in Louisville, "Lively Shively" isn't exactly going to inspire a lot of warm feelings towards bourbon (or Louisville) by visitors.

Ultimately, I think it's probably just more a cost issue. Tearing down and rebuilding is more difficult than building from scratch. Plus, I'd bet Shelby County has lower taxes than Jefferson county, which actually has pretty high municipal taxes.

Going east into Shelby county, they're farther from Louisville, but in a more rural setting nearer to Buffalo Trace, the Horse Park, the state capital, lexington, etc (other tourism destinations) with a ton of space. Shively is essentially in the city of louisville, in a rougher area of town, but more improtantly, an area fairly well built-up, leaving little space for expansion.

Those are my thoughts anyway.

Edited May 29, 2014 by ModernThirst

[squire]

The important thing is the facility is a reality and that is really big news.

[TunnelTiger]

As usual Squire nails it. As a manufacturer you go to the least costly sight. No doubt they have been offered lowered conty taxes, deffered taxes, pennies on the dollar real estate, no cost for correcting any EPA problems at the old site, and new investments get terrific state + federal tax rebates.

[sutton]

There's good info on both Chuck's blog and Whisky Advocate.

Diageo is a bit frustrating to me since I do respect their long-term commitment to this industry and willingness to invest (not just here but on the dark side as well). The side that frustrates me is also well described in another of Chuck's blog posts on the orphans ... after reading the information Chuck had there on the true history of that whiskey, it made me want to try a bottle or two since it could be a rare opportunity for someone like me to try an Old Bernheim.

So Diageo ... how do you strike that balance? Your marketing turned me off from ever considering purchasing one of these bottles, Chuck's bit of history and truth has almost made me do a 180 ... do you really feel the need to pull the wool over the eyes of the sheeple to move volume? Couldn't you be more forthcoming to attract the enthusiast/historians amongst us at the same time, information that the sheeple would ignore anyway and still buy?

[Josh]

I predict the facility will be operational just in time for a new glut.

[393foureyedfox]

I predict the facility will be operational just in time for a new glut.

you say that like it's a bad thing

Im starting to think that large scale bunkering may be a bad idea, due to this. If you have a few things you really love, go for it....but Im thinking 5-10 years from now the proliferation of these new guys will make some interesting options

[bourboNcigars]

Upon putting up the building they miraculously find the stolen cases of pappy and rename it gran pappy lol

[AaronWF]

Inevitable, yet disturbing. I am sad, yet hopeful. Seeing as how Diageo tends to view their customers as rich and ignorant, I'm surprised it took them this long to enlarge their American footprint...

[smokinjoe]

Honestly, I yawn at the opening of every new micro-distillery that opens seemingly on a weekly basis, now. And honestly, I have little hope that any of those, save maybe 2, will make a bourbon worth a damn. However, this news excites me. I not only have hope for fine whiskey from this Diageo distillery, I expect fine whiskey from it.

[squire]

Diageo does know how to make some fine whsky.

[Josh]

you say that like it's a bad thing

Im starting to think that large scale bunkering may be a bad idea, due to this. If you have a few things you really love, go for it....but Im thinking 5-10 years from now the proliferation of these new guys will make some interesting options

It's a joke.

Something to remember, though, is that gluts don't only mean a lot of whiskey for cheap, they also usually mean more consolidation and closed or mothballed distilleries.

[mbroo5880i]

New capacity usually comes on line late in a market cycle. Not sure about the whiskey market since product availability is delayed due to aging requirements.

I understand that Diageo is major spirits company but the quality of the product will depend on a lot of factors not just having the financial ability to back a major investment in a new distillery.

I am not a whiskey historian so I will ask the question. Has Diageo ever grown a distillery or whiskey brand organically? Or has much of their growth been through acquisition? The other question which is even more important and, maybe I missed it, but have they named a "master" distiller or whiskey guy to oversee this project? Is it important at this stage? I will say in other industries having the management team in place from the beginning of a greenfield project can be important.

[risenc]

But does anyone think that the impending glut will be as bad as last time? It might slow down as a fad, but I think the return to American whiskey is a much longer-term trend.

In any case, Diageo's not stupid, and they're nothing if not global in their worldview. My bet is that their bet is on the foreign market for American whiskey. Brown-Forman is the only real player there, with Beam an underperforming second. At the same time, overseas demand is booming. The US market isn't nothing, but the folks at Diageo probably don't care whether hipsters move on to rum or tequila or whatever will bring the US bourbon boom to an end.

[T Comp]

But does anyone think that the impending glut will be as bad as last time? It might slow down as a fad, but I think the return to American whiskey is a much longer-term trend.

In any case, Diageo's not stupid, and they're nothing if not global in their worldview. My bet is that their bet is on the foreign market for American whiskey. Brown-Forman is the only real player there, with Beam an underperforming second. At the same time, overseas demand is booming. The US market isn't nothing, but the folks at Diageo probably don't care whether hipsters move on to rum or tequila or whatever will bring the US bourbon boom to an end.

I agree but...this bet has been placed before.

http://www.businessweek.com/stories/1991-06-30/sweet-sales-for-sour-mash-abroad

[squire]

But does anyone think that the impending glut will be as bad as last time?

Of course not, nothing like it. No longer a regional specialty, Bourbon has made a stunning debut on the World stage. If the domestic market becomes saturated there are plenty of other places to boldly go where no Bourbon has gone before.