Premium drinks giant Diageo is to invest £1bn in the next five years to expand the production of its premium Scotch whiskey, following huge demand for its brands globally.

Under the expansion plan, Diageo will come up with a new malt distillery and will expand its existing distilleries.

Over the period of five years, Diageo plans to invest over £500m in the construction of the distillation and warehousing capacity to meet the growing demand of Scotch whiskey and store the additional million litres of whiskey that will be produced by the new distillery.

If the demand exceeds, the company will come up with a second distillery.

This increased production capacity will also force the company to invest £500m in working capital for the maturing whiskey that will be laid down over the next five years.

As part of investment, Diageo also plans to set aside £5m towards community initiatives in the next five years as part of its sustainability and responsibility programme in Scotland.

Diageo chief executive Paul Walsh said they expect that success to continue, particularly in the high growth markets around the world, which is why they are announcing this major investment in Scotch whisky production, committing over £1bn in the next five years, to seize that opportunity for global growth.

Over the last five years, the company has reported 50% growth in net sales of its Scotch brands with total net sales of nearly £3bn in this financial year.

In the first half of financial year 2012, Diageo’s Scotch category saw 8% volume growth and 14% net sales growth.