LONDON—Diageo PLC said Thursday it would invest $49 million in expanding its Clynelish Scotch whisky distillery, part of a bet by the U.K. drinks giant that global demand for the liquor will continue to grow.

Located deep in the Scottish Highlands, the Clynelish distillery produces single-malt whisky which is sold on its own or used in blended whiskies such as Johnnie Walker. The planned expansion will double the distillery's production to nine million liters of alcohol a year.

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