DGE Diageo Plc

By Saabira Chaudhuri

Diageo PLC is getting back into the Irish whiskey business two years after getting out of it.

The world's largest spirits maker in 2014 sold its Irish whiskey brand Bushmills to Jose Cuervo in exchange for Don Julio tequila.

Irish whiskey has been on a tear, growing 131% by volume globally during the past decade, easily trumping rises of 13% for Scotch whisky and 56% for bourbon during the same period, according to industry tracker IWSR. Rising demand, especially from the U.S., has turned Irish whiskey into the world's fastest-growing major spirit.

Diageo Chief Executive Ivan Menezes last year defended the company's decision to sell Bushmills, saying, "It's not the Irish whiskey sector that's hot, it's certain brands that are hot."

The Irish whiskey sector is dominated by Pernod Ricard SA's Jameson brand, which makes up 67% of all global volumes and is responsible for much of the category's growth.

Mr. Menezes said Diageo had "put in a lot of investment and a lot of marketing, but we could not get Bushmills to accelerate."

Now Diageo will invest 25 million euros ($26.77 million) in a new distillery to create an Irish whiskey brand called Roe & Co. at St James's Gate in Dublin, where it makes Guinness. The upscale brand will compete with Pernod Ricard's roster of brands like Redbreast and Midleton as well as brands from scrappy young distillers like Teeling Whiskey Co., which opened in 2015.

Diageo said the first blend of Roe & Co. will be available in Europe starting in March. As is common practice, the company will start out by sourcing Irish whiskey from other distillers and seasoning these in casks.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

January 31, 2017 05:45 ET (10:45 GMT)

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