On Wednesday 21st June 2017, Diageo Plc has agreed to buy George Clooney’s high-end tequila brand Casamigos for up to $1 billion. Diageo, the world’s largest spirits company, according to Euromonitor International, seeks to lift its presence in the tequila fast-growing market. Jeremy Cunnington, Senior Alcoholic Drinks Analyst at Euromonitor International commented about the acquisition:
“The key element is the continued healthy growth of tequila, especially in the US, driven by high-end tequilas such as Casamigos. The company obviously feels that the growth trajectory of the brand, especially with its added distribution heft will produce results. However, considering they already have a raft of high-end tequilas, such as Don Julio, Peligrosso and De Leon it does seem rather surprising. However, it is worth noting that this acquisition is part of a general trend of companies willing to pay very high multiples for spirits brands of perceived quality, eg. Pernod Ricard and Smooth Ambler and Constellation’s recent spirits acquisitions. It is very much a seller’s market and a number of buyers will be burnt with their optimism for the brands’ performance not matching reality.”
According to Euromonitor International:
- Almost 292 million litres of tequila have been sold globally in 2016. In 2021 Euromonitor predicts the world will consume almost 335 million litres
- In 2016, consumption of tequila grew by 6% globally and 8.4% in the US
- The USA represent the largest market for tequila with over 144 million litres of tequila sold in 2016, followed by Mexico and Germany
- Diageo represents the ninth largest tequila player in the world with 2.3% shares in 2016, up from 1.4% in 2011
- Diageo is the global leader in spirits, with 9.2% of the market
- In the USA, Diageo represents the seventh largest tequila player with 2.7% shares in 2016, up from 1.6%
In the report “Diageo plc in spirits” Cunnington explains: “Diageo’s objective is to strengthen its position as the world’s leading producer of premium alcoholic drinks. Premium is a subjective word, although, if it means spirits excluding local, low-value products (eg. Indian rum) and higher than average priced beer and wine products, then, that is the case.” The report also highlights that North America represents a key but challenging market for Diageo.
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