(Reuters) - Diageo (LON:DGE) said on Tuesday it is building a $75 million distillery in China to make its first ever single-malt whiskey of a Chinese origin, as it looks to tap into the spirit's growing demand in the world's largest beverage alcohol market.
Located in the country's southwest Yunnan province, the 66,000 square meter distillery will source water from the Erhai lake and will begin construction next year.
Single malts are one of the few drinks that Chinese consumers enjoy at home or in small groups, with volumes rising 20% in 2020, wine and spirits consultancy IWSR said, adding that it is also a preferred tipple among its large population of millennial consumers.
COVID-19-driven restrictions on foreign travel have also saved people money and driven a growing fondness for high-end spirits.
In July, the Johnnie Walker whisky maker reported that double-digit growth in scotch whiskeys contributed to a 38% jump in net sales in Greater China in its fiscal 2021 ended June 30.
"The demand for whisky is growing rapidly among middle-class consumers who are keen to further discover and enjoy fine whiskies," Sam Fischer, president, Diageo Asia Pacific and Global Travel said in a statement.
The company also said the site of the distillery, called Diageo Eryuan Malt Whisky Distillery, will be carbon neutral when it opens.