Diageo to build $115 million bourbon distillery in Shelby County

jpatton1@herald-leader.comMay 29, 2014 

British liquor giant Diageo plans to build a new, $115 million distillery in Shelby County, the company announced Thursday.

The distillery — with a capacity of 1.8 million proof gallons, or 750,000 9-liter cases — would distill bourbon and other whiskies.

Diageo, based in London, also plans to build six barrel-storage warehouses on the site, which would have a 100-acre buffer to maintain the surrounding landscape.

According to a news release, Diageo (pronounced dee-AH-gee-O) will buy 300 acres on Benson Pike in Shelby County near Bagdad and break ground in coming months.

Finalization of the plans is subject to approval by local government.

The announcement comes as bourbon, most of which is made in Kentucky, continues to boom. It is currently the fastest growing category of spirits in the United States, enjoying double-digit expansion in the past year. Worldwide, demand for premium bourbons and new flavored whiskies continues to rise as well.

Until now, Diageo has had no active distillery in Kentucky, although the company owns the historic Stitzel-Weller plant in Louisville, which is being turned into a $2 million tourist attraction.

With the Shelby County distillery, which the company says it hopes to have operating by late 2016, Diageo will begin making its own bourbon; until now, the company has marketed bourbon distilled by others, including the popular Bulleit brand and "Orphan Barrel" series.

The company was reluctant to say outright that Bulleit, which is widely rumored to be made at Four Roses Distillery in Lawrenceburg, will move to the new distillery.

"Diageo is constructing the facility with flexibility and growth in mind and will distill a number of current and future Diageo bourbons and North American whiskey brands," Diageo's North American executive vice president, Guy Smith, said in a statement.

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.

Also Thursday, the Kentucky Economic Development Finance Authority gave preliminary approval for $4 million in tax incentives for Diageo's project, including $2.5 million in performance-based corporate income tax credits and wage assessments. The company also is eligible for an additional $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 $2 million on the land, $94.3 million on the distillery, $12.4 million on equipment, and $6.3 million on other start-up costs.

The jobs created will have an average hourly wage of $29 including benefits.

Larry Schwartz, president of Diageo North America, said in a statement, "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." Diageo's North American headquarters is in Norwalk, Conn.

"Distilled spirits remain a marquee industry in the commonwealth," Gov. Steve Beshear said in a statement, "and Diageo's new distillery will ensure that even more Kentucky bourbon is enjoyed around the globe."

Local leaders also hailed the news of the major investment.

Shelby County Judge-Executive Rob Rothenburger said, "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."

Diageo will have an open house to discuss the plans for the proposed Shelby County distillery, answer questions and hear from the public. The event is scheduled for 2 to 7 p.m. June 10 at the Shelbyville Country Club, 47 Smithfield Road.

A public hearing will be at 6:30 p.m. June 17 at the Stratton Community Center, 215 Washington Street in Shelbyville.

Diageo announced in February that it will open a visitors center at its legendary Stitzel-Weller Distillery in Louisville. Diageo has said that it hopes that the visitors center will be included on the Kentucky Bourbon Trail tour, the popular tourism project of the Kentucky Distillers' Association.

Besides Bulleit bourbon and Bulleit Rye, Diageo's North American whiskey portfolio includes George Dickel, which is made in Tennessee, and the Crown Royal and Seven Crown brands. Diageo is the world's leading premium drinks company and 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.

Shares of Diageo (NYSE: DEO) closed Thursday at $127.77, up $2.11, or 1.68 percent.

Janet Patton: (859) 231-3264. Twitter: janetpattonhl.

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