Diageo’s Post-Cuervo Tequila Strategy Emerges, With Two Deals In Three Weeks

Speaking to SND just after Diageo’s joint play for prestige Tequila DeLéon with Sean Combs, Diageo North America president Larry Schwartz said his company was eyeing more activity in Tequila. Today, the drinks giant made good on that promise, announcing the purchase of Peligroso Tequila from California-based Peligroso Spirits Co. for an undisclosed sum.

The deal comes less than a month after the acquisition of Tequila DeLéon and represents another step in Diageo’s plan to fill the profit gap left by Jose Cuervo when that brand departed the Diageo portfolio last year.

Today, Schwartz characterized the Peligroso deal as part of a broad strategy to create a range of Tequilas “at complementary price points to appeal to a wide range of consumers.” He added that Diageo is now positioned “to capture the range of emerging consumer trends that will shape and drive the next few years of category value growth.”

Peligroso, a super-premium 100%-agave Tequila, ranges from $30 to $55 a bottle across its line, which includes Silver, Reposado and Anejo as well as a cinnamon-flavored offering. Diageo says the brand—currently in 12 states—is rooted in the action sports and surfing culture of Southern California and, with its cinnamon variant, is drawing on consumer interest in flavored spirits. Super-premium Tequila, defined as $20-$40 a bottle, is currently the fastest growing segment of the category in Nielsen channels.

Within Diageo’s newly expanded Tequila portfolio, Peligroso will be positioned below ultra-premium-and-above DeLéon and ultra-premium Don Julio. DeLéon, which sold about 10,000 cases last year, runs from $120 to more than $1,000 a bottle. Don Julio, priced slightly above Peligroso, enjoyed a strong year in 2013, rising 15% to 230,000 cases, according to Impact Databank.

Schwartz told SND the company’s goal was to replace the profit lost via the split with Cuervo within two years. With two Tequila deals within three weeks’ time to start the year, it’s off to a good start.

Tagged : DeLeón, Diageo North America, Jose Cuervo, Peligroso Spirits Co., Peligroso Tequila, Tequila

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