It is always encouraging to see investment going in to the Scotch whisky industry.
Diageo, following on from Pernod Ricard’s £40m investment in its malt distilleries announced last week, have upped the anti - big time - to a cool £1bn to fuel future expansion in the the emerging markets of Asia, Latin America and Africa.
Commentators are very excited by this booming investment. Clearly on the face of it this is a Good Thing. It is good for whisky and the industry, but is it good for Scotland?
Of that headline grabbing figure, £500m is to build two 10m litre Roseile class distillofactories, expand existing capacity by 20m litres, and build new warehousing to store all the maturing spirit in.
Diageo will seek planning permission for Roseile 2 at one of three existing potential sites Teaninich, Inchgower and Glendullan.
It will in addition expand capacity at nearly half its existing 28 distilleries, and is looking to build the second distillery, Roseile 3, in two to three years time.
Diageo said it would consider building a third plant if whisky sales continued to grow at more than 10% a year to make four Roseile class plants.
The other £500m is the working capital for the extra 40m litres (possibly 50m) of spirit per annum that will be laid down over the next five years. Distilling is a very capital intensive business.
The company will increase its existing single malt distilling capacity by 50%.
So it’s £500m in infrastructure and £500m in cash flow over 5 years of extra distillation. ‘100s’ of new jobs will be created. “Whisky Jobs Galore!”
The Guardian reports Campbell Evans of the Scotch Whisky Association (SWA) saying that the promise of these new jobs marks ‘a turning point’ for the industry, because ‘while many producers have been increasing production – including reopening mothballed distilleries – it has so far not particularly boosted employment’.
However I happen to know one reopened, mothballed distillery that employs 51 people.
The reality is that whisky distilling is super efficient. The £4bn turnover industry employs only 8,000 people - and most of them are in administrative, warehousing, production and marketing roles; around 750 are employed in distilling alone.
Few have The Independent reminded folk that “in 2009 Diageo ended a 192- year history of Johnnie Walker with the Ayrshire town when it closed the facility in March with 500 job losses.” 200 were relocated.
So how many new jobs will the £1bn new investment create? How many are the SWA’s vaunted ‘turning point’, the news channels’ headline grabber, the ‘Whisky Jobs Galore’?
Er, actually 100 new jobs. That’s £10m per job.
In addition, to be fair, there will be 20 apprentices and graduate trainees per year, over the next five years, but these maybe funded by government initiatives. There will be construction jobs but these are rarely for locals.
By contrast, James Watt’s £12m turnover BrewDog today has announced 40 new jobs - for the investment of £2.2m
Diageo increases its current single malt distilling capacity by a whopping 50% and creates just 100 jobs. It is this extraordinary efficiency that we should be in awe of - not the phoney ‘jobs galore’ spin.