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Cuervo Weighs Its Options After Failure Of Diageo Talks

December 12, 2012

Following the collapse of negotiations with Diageo over global distribution of Jose Cuervo, the Beckmann family is now seeking a new route to market for their 6.9-million-case brand, the largest Tequila in the world.

Under pressure from the economic downturn of recent years and the arrival of new 100%-agave competitors, Cuervo has been flat in the U.S. market since 2004. Last year it depleted 3.5 million cases in the U.S., a 1% decline. Proximo Spirits, the Beckmann-owned U.S. marketer that already handles the family’s 1800 Tequila and other labels, appears to be the most likely choice as Cuervo’s next U.S. distributor. But that arrangement wouldn’t provide a route to market outside the U.S. and Mexico—and Cuervo does more than 35% of its volume outside those two markets.

Some analysts have theorized that Pernod Ricard might be interested in adding Cuervo to its global stable because it has a small presence in the U.S. Tequila market with Olmeca and Avión. But that scenario would be far more likely if Pernod could acquire Cuervo outright, because the French company has long shown a preference for marketing its own brands. Thus far, Cuervo’s owners have shown no inclination to sell.

Among other potential contenders, Bacardi and Brown-Forman seem far less likely possibilities, as Bacardi holds a significant minority stake in Patrón and also owns Cazadores, while Brown-Forman is well-positioned with El Jimador and Herradura. Likewise, Gruppo Campari has a burgeoning Tequila stable including Cabo Wabo and Espolón. Still, were it to seek a link with Cuervo, Campari’s North American leadership has ample experience with the brand. As Shanken News Daily reported exclusively on November 21, Roy Danis—Jose Cuervo International’s managing director-North America since 2009—was recently named Campari America’s country manager for the U.S. and Puerto Rico.

If the Beckmanns do opt to market Cuervo through Proximo in the U.S., they could take a piecemeal approach to the brand’s global distribution, a template similar to the one now being used by SPI Group on Stolichnaya.

 

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