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Diageo Sells Bushmills To Casa Cuervo, Gets Full Control Of Don Julio Plus $408M

November 3, 2014

Diageo, which has made a concerted effort to rebuild its Tequila business after Jose Cuervo left its portfolio last year, took a big step forward in the category earlier today with the purchase of the 50% stake of fast-rising Don Julio that it didn’t already own.

In return, Diageo has agreed to sell Bushmills—one of the world’s top-selling Irish whiskey brands—to Casa Cuervo. To complete the deal, Cuervo has agreed to pay Diageo $408 million, and to early termination of Casa Cuervo’s production and distribution agreement for Smirnoff in Mexico.

The upscale Tequila segment continues to thrive—particularly in the U.S. market—and Don Julio has been one of its star performers. It rose by 15% to 230,000 cases in the U.S. in 2013, and is enjoying solid gains this year. It’s also a key value contributor. While Bushmills sold 800,000 cases globally in Diageo’s last fiscal year compared with Don Julio’s 590,000 cases, the Tequila entry’s net sales were nearly twice as much as the Irish whiskey’s.

Earlier this year, Diageo acquired two high-end Tequila upstarts: DeLéon and Peligroso. With the addition of the remaining half of Don Julio, the spirits giant has become one of upscale Tequila’s most important players. Meanwhile, the loss of Bushmills takes Diageo out of Irish whiskey, one of the global spirits market’s fastest-growing categories. Despite the fact that it’s long been one of the category leaders, Bushmills hasn’t kept pace with Irish whiskey’s expansion in the U.S. (Irish whiskey’s biggest market) in recent years. However, the brand has grown consistently, and last year was up 9.5% to 230,000 cases in the U.S., while it advanced by 14% globally, according to Impact Databank.

 

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