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Talk Of A Cuervo Sale Abounds, But Tequila Leader Faces Battle As Competitors Grab Share

May 25, 2011

Jose Cuervo, the world’s largest Tequila brand, may be on the block, but with its growth essentially stalled despite Tequila’s continued expansion, rival brands like Sauza are also attracting interest. Diageo is reportedly in negotiations to buy Cuervo from the Beckmann family for a price in the $2 billion range. But regardless of whether Diageo succeeds, Cuervo has lost significant ground in recent years as competitors have eaten away at its category share.

Since 2005, the Tequila category’s annual sales in the U.S. have been torrid, growing by more than 2 million cases. During that period, Cuervo’s annual sales in the U.S. have declined by 6%—from 3.7 million cases in 2005 to 3.45 million cases last year. The brand’s share of the Tequila category fell from 40.6% in 2005 to 30.9% in 2010. Meanwhile, archrival Sauza’s annual sales advanced by more than 20% from 2005-2010, reaching 1.6 million cases in 2010.

Despite its solid growth trend, Sauza’s category share actually slipped in the 2005-2010 period, outpaced by Patrón’s remarkable rise. In 2005, even after years of rapid growth that pushed it past the half-million-case mark, Patrón’s U.S. market share was only 6.8%. Over the next two years, it added about 1 million cases, leapfrogging Sauza in 2007 to become the market’s number-two Tequila and increasing its market share to 15%. Patrón’s rapid surge has slowed in recent years, though its annual volumes have continued to rise and are now almost 10% larger than in 2007.

Both Sauza and Patrón have their own interesting ownership situations. Sauza may well become an acquisition target after its owner, Fortune Brands, completes its transformation into stand-alone spirits play later this year, although Beam ceo Matt Shattock has strongly affirmed the company’s intent to go forward as an independent player. In mid-2008, Bacardi acquired an undisclosed minority stake in Patrón Spirits Co.

US – Top Three Tequila Brands
(millions of nine-liter cases)
Depletions Share of U.S. Tequila Market
Rank Brand Company 2000 2005 2010 2000 2005 2010
1 Jose Cuervo Diageo North America 3.33 3.68 3.45 44.8% 40.6% 30.9%
2 Patrón The Patrón Spirits Co 0.09 0.62 1.70 1.1% 6.8% 15.2%
3 Sauza Beam Inc 0.97 1.31 1.60 13.0% 14.4% 14.3%
Total Top Three 4.38 5.61 6.75 59.0% 61.8% 60.5%
Source: IMPACT DATABANK
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