Pernod Ricard SA, the French distiller, is expanding its Scotch whisky operations even as global sales of the spirit decline and its larger rival retrenches.
The maker of Chivas Regal unveiled a 25 million-pound ($39 million) malt distillery in the Speyside region of Scotland Monday that will help boost production of Chivas and related brands by 17 percent. The company is also working to increase capacity at the nearby Glenlivet distillery, part of a plan to invest 60 million pounds annually into its Scotch business.
The Paris-based company’s push comes amid a worsening environment as export revenues dropped 7 percent last year to 3.95 billion pounds, the steepest decline in 16 years, according to the Scotch Whisky Association. Sales have been hurt by China’s anti-graft crackdown as well as the increasing popularity of Irish and American whiskies. Diageo Plc, the British maker of Johnnie Walker, said earlier this year that it’s slowing down capital expenditures in the category.
Even with the downturn, “the single malt category has been dynamic,” Alexandre Ricard, Pernod Ricard’s chief executive officer, said in an interview at the new distillery.
Sales of Pernod’s Scotches, which also include Ballantine’s Finest and Royal Salute, rose 2 percent in the first nine months of its fiscal year. Chivas Regal, its biggest brand, was stagnant while the growth of China’s middle class has helped drive sales of lower-priced blends.
“We have to seduce new customers,” Laurent Lacassagne, CEO of Chivas Brothers, a division of Pernod, said in an interview. “The business entertainment bubble is mainly gone.”
Nicola Sturgeon, the first minister of Scotland, attended the opening of the distillery, which houses eight copper pot stills and can produce as much as 10 million liters (2.6 million gallons) per year. Scotch whisky is Scotland’s second-largest export, after oil, according to the Edinburgh-based industry association.