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Diageo confirms plans to launch new Tequila

Diageo has confirmed plans to develop a new brand of Tequila now its distribution agreement with Jose Cuervo has come to an end.

Don-Julio Tequila Diageo
Diageo looks likely to fill the premium Tequila gap left by its existing super-premium brand Don Julio

CEO Ivan Menezes told reporters today at the group’s end of year financial results presentation that Diageo has been exploring new routes in the Tequila category since Jose Cuervo left its stable on 30 June 2013.

The group has been looking to plug a gap left by premium brand Cuervo, which generated £308m sales and £78m profit in Diageo’s financial year to 30 June, but was unable to do any meaningful activity until the group was no longer associated with Cuervo.

While Diageo already plays in the super-premium end of the Tequila category with Don Julio, it no longer has a brand to fill the premium end of the spectrum.

However today Menezes confirmed Diageo has “some exciting ideas in the pipeline”.

“(Don Julio) plays at the ultra premium end of Tequila at US$50 a bottle where all the growth is, and is growing in double digits,” he said. “But as you would expect we are… really begin to activate our exploration on alternatives of Tequila.

“We have some exciting ideas in the pipeline I can’t talk about today but you can count on us to be an active player in this category and sector but it starts with having this wonderful position with Don Julio.”

Don Julio grew net sales by 13% and volume by 9% in Diageo’s last financial year, driven by sales in its primary market of North America.

Outside North America the brand also delivered double digit net sales growth particularly in Asia Pacific, Africa, Eastern Europe and Turkey, driven by experiential consumer events.

Jose Cuervo meanwhile has continued to line up alternative distributors in its key markets, with The Kirkwood Group appointed by North American distributors and sister drinks group Proximo Spirits to take over the route to market in Canada, and Febvre & Company appointed in Ireland.

Jose Cuervo is thought to announce the remainder of its new distribution agreements in due course.

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