Diageo to Buy Tequila Brand Casamigos -- 2nd Update
June 21 2017 - 2:20PM
Dow Jones News
By Saabira Chaudhuri
LONDON -- Diageo PLC has agreed to buy upscale tequila brand
Casamigos for $700 million, part of a larger push by the spirits
giant to increase its exposure to the fast growing tequila
market.
The world's largest spirits maker will pay the amount upfront to
acquire Casamigos, co-founded by actor George Clooney, and said it
would pay also pay a potential $300 million over 10 years linked to
performance.
Tequila is among the fastest-growing spirits in the world right
now, with volumes increasing 5.3% last year compared with the 0.04%
growth seen by the broader spirits industry according to industry
tracker IWSR.
Casamigos, which was founded in 2013, sold 120,000 cases last
year, mainly in the U.S. The brand is expected to hit 170,000 cases
this year. Its other co-founders are Rande Gerber, husband of
supermodel Cindy Crawford, and real-estare tycoon Mike Meldman.
The Casamigos deal is Diageo's first since 2015. The company had
been focused on jumpstarting sales in the U.S., its biggest market,
where performance has until recently been weak as consumers
abandoned brands like Smirnoff and Captain Morgan for smaller
rivals.
Diageo plans to expand Casamigos internationally, saying it sees
strong potential across Western Europe in particular. The tequila
comes in three variants that sell for between $45 and $55 a
bottle.
"The category is relatively underdeveloped outside North America
and we see a huge opportunity for our existing brands and
Casamigos," said Diageo's North America head Deirdre Mahlan on a
call with reporters.
The deal is Diageo's second in premium tequila in recent years.
The drinks giant in 2015 swapped its Bushmills Irish whiskey brand
for Don Julio, previously owned by Jose Cuervo. It also owns two
other tequila brands, Peligroso and DeLeon, but these are much
smaller, selling under 10,000 cases a year according to Ms.
Mahlan.
Diageo, like its rivals, has said it would focus on growing
premium brands as the company grapples with a stricter regulatory
environment. Alcohol volumes in major developed markets have also
dropped as people drink less but better.
As part of that push, the London-headquartered company recently
launched an upscale Irish whiskey brand called Roe & Co. and
has also launched pricey bourbon brands like Blade and Bow and
Heaven Hill.
Diageo said the deal will be earnings neutral for the first
three years and accretive thereafter. It should close in the second
half of this year.
--Tapan Panchal contributed to this article
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
June 21, 2017 14:05 ET (18:05 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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