Diageo says it has secured its position in the premium end of the tequila market with a deal to take full ownership of Tequila Don Julio in exchange for selling Bushmills whiskey to Casa Cuervo.
The transaction, which sees Diageo take on the 50% of Don Julio it did not already own, also includes the early termination of Casa Cuervo’s production and distribution agreement for Smirnoff in Mexico.
It means a net payment of $408m to Diageo upon completion, expected to be early next year.
Ivan Menezes, chief executive, said: “This transaction delivers two key objectives for us. We have secured our position in the growing super and ultra-premium segments of the tequila category and further strengthened our global footprint by expanding our leading position in Mexico where the growth of spirits has great potential.
“Diageo has realised this opportunity through the breadth and depth of our portfolio. It delivers our strategy: to build our presence in the world’s fastest growing markets and lead the industry in the biggest growth opportunities. I am delighted we have reached this agreement.”
Smirnoff volume and net sales in Mexico in the year to 30 June were 285,000 cases and £9m respectively. Bushmills volume and net sales in the same period were 800,000 cases and £57m. Tequila Don Julio had volume and net sales of 590,000 cases and £105m, of which Diageo accounted for 345,000 cases and £75m net sales.
