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Diageo’s Walsh Says Cuervo Deal Must Include Control

March 26, 2012

Diageo CEO Paul Walsh told the Wall Street Journal over the weekend that an extension of Diageo’s current global distribution deal with Mexico’s Beckmann family on Jose Cuervo Tequila would need to see Diageo gain control, or a route to control of the brand. Walsh asserted that Cuervo isn’t fully “paying its rent” in the Diageo distribution stable under the current deal, which runs through 2013. That date provides one “bookend,” or leverage point, to the negotiations, Walsh said, with his insistence on acquiring control of the brand being the other.

In the same interview, Walsh commented on speculation that Diageo could seek to acquire certain Beam Inc. brands, notably Jim Beam Bourbon, to fill a gap in Diageo’s portfolio. While acknowledging that gap, Walsh said an alternative to such an acquisition would be a partnership on a Bourbon similar to Diageo’s pact with Sean Combs on Cîroc, which has paid ample dividends. Speaking at the Impact Marketing Seminar on Thursday, Stephen Rust, president of Diageo’s Catalyst division in the U.S., also played up the latent potential in the group’s existing Bulleit Bourbon and George Dickel Tennessee whiskey brands as another route into a bigger presence in the thriving American whiskey category.

Finally, Walsh confirmed that recently appointed Diageo COO Ivan Menezes was the lead internal candidate to succeed him as CEO. But he added that he intended to stay at least through 2014, to see through three-year financial targets—including annual sales growth of 6%—which he set last August.

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