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Proximo’s New Mission: Revitalizing Jose Cuervo In The U.S. Market

March 1, 2013

Import Company Takes On A Brand That’s 1 Million Cases Larger Than Its Entire Portfolio, And Slumping

As we tweeted shortly after this morning’s announcement, in a widely anticipated move, Casa Cuervo is bringing its namesake Tequila brand under the wing of its U.S. importer Proximo Spirits effective July 1—the day after it departs the Diageo North America portfolio, where it’s been a key contributor for a quarter century. Diageo, which has long handled Jose Cuervo around the globe on an agency basis, had hoped to acquire ownership of the brand from the Beckmann family, but negotiations toward that goal fell apart in December, prompting the Beckmanns to plot a new global distribution route for the world’s largest Tequila label.

In the U.S. market, Jose Cuervo will join a Proximo stable that includes 1800, Maestro Dobel, Zarco and Gran Centenario Tequilas as well as Three Olives vodka, Boodles gin, The Kraken and Matusalem rums and Stranahan’s Colorado whiskey among others, accounting for more than 2.5 million cases in total. While it’s had success with many of those labels, Proximo will take on its most ambitious project to date in turning around Jose Cuervo, which has been suffering in the U.S. recently, sliding 10% to 3.5 million cases from 2007-2012.

Asserting that Cuervo is now ripe for a U.S. turnaround, Proximo president and CEO Mark Teasdale said today, “We plan to make considerable investments in brand-building and innovation for the Jose Cuervo portfolio to accelerate its growth.” Teasdale went on to tout the progress Proximo has made over its five years in business in expanding 1800 and Three Olives, and in building The Kraken from scratch.

Indeed, according to Impact Databank, super-premium 1800 was up 15% to 925,000 cases last year and has jumped by 73% since 2009. Meanwhile, Three Olives, which sells for around $19 a bottle, grew by 18% to nearly 1.5 million cases from 2009-2011. The Kraken (94-proof, around $20 a bottle), which launched in 2010, has been among the brands driving a surge in high-proof rum. Last year it leapt 50% to 225,000 cases.

Given its strong track record, as well as the new focus and investment for Jose Cuervo, Proximo could inject new life into the franchise. But there are challenges ahead. Aside from leaving Diageo’s formidable U.S. distribution network, Cuervo will continue to confront the proliferation of accessibly-priced, 100%-agave Tequilas that are competing in the same price arena as its own core mixto offering. One such entry, E.&J. Distillers’ Camarena, which launched in 2010 and often sells for slightly less than $20 a 750-ml., was up nearly 30% to 400,000 cases last year, according to Impact Databank estimates. Cuervo’s competitors also will likely include Diageo, whose CEO Paul Walsh recently suggested that, after the loss of Cuervo, the drinks giant will make an “organic play” in Tequila as soon as this year.

In a 10-year-trend tracked by Impact Databank, Jose Cuervo rose from 3.2 million cases in 2002 to 3.4 million cases in 2003, 3.6 million cases in 2004, 3.7 million cases in 2005 and 3.8 million cases in 2006, peaking at 3.9 million cases in 2007. In the following year it dipped slightly to 3.8 million cases before falling to 3.6 million cases in 2009, 3.545 million cases in 2010, 3.510 million cases in 2011, and 3.450 million cases last year.

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