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Diageo Completes Acquisition Of Don Julio

February 27, 2015

Diageo has gained full ownership of Don Julio Tequila, following completion of a deal to acquire the 50% stake in the brand that it didn’t already own. The transaction gives Diageo complete ownership and distribution rights to the Tequila Don Julio and Tres Magueyes brands, along with the La Primavera distillery, which is located in the Los Altos region of Jalisco, and the facility’s inventory and agave supply.

Diageo has been in a full-tilt revitalization of its Tequila business since Jose Cuervo departed its portfolio in 2013. Full ownership of Don Julio now strengthens its hand in a category that rose by 3% to 14 million cases last year and saw far more torrid growth in the upscale 100% blue agave segment, where Don Julio ($48-$132) plays. The brand has been among that tier’s star performers, rising by 15% to 230,000 cases in 2013 and growing 8.5% to 270,000 cases last year. In Diageo’s fiscal first half ended December 31, 2014, its net sales rose 21%. The brand’s key competitors include segment leader Patron, as well as 1800, Camarena and Sauza Hornitos. Globally, Don Julio has grown from 270,000 cases in 2012 to 360,000 cases last year, according to Impact Databank.

Early last year, Diageo also bolstered its presence in the Tequila category when it formed a joint venture with Sean Combs to acquire the DeLeon Tequila brand, whose expressions range in retail price from $60 to $1,000 a 750-ml. bottle. Last year the company also acquired another upscale Tequila brand, Peligroso, which retails at between $30-$55 a 750-ml. bottle.

As part of the agreement to gain Don Julio, Diageo agreed to sell its Bushmills Irish whiskey brand to Casa Cuervo, which also agreed to pay Diageo $408 million and terminate its Mexican distribution agreement for Smirnoff, which has now returned to the Diageo Mexico fold. While Bushmills outpaces Don Julio in terms of global volume, Don Julio’s net sales are nearly twice as large.

 

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