Diageo completes Don Julio Tequila acquisition

Diageo has completed its full acquisition of super-premium Tequila brand Don Julio, marking a “significant milestone” for the group.

Regulators have agreed Diageo’s full acquisition of Don Julio Tequila

The British company revealed in November last year that it had agreed to acquire the remaining 50% of Don Julio that it did not already own, giving co-owner Jose Cuervo its Bushmills Irish whiskey brand in return.

The deal also involved the early termination of Cuervo’s production and distribution of Smirnoff in Mexico, while Cuervo also agreed to pay the Diageo a lump sum of US$408.

Completion of the deal allows Diageo to achieve its long-term goal of building its super- and ultra-premium Tequila portfolio, which grew last year with the purchase of a 50% stake in rap star Sean “Diddy” Combs’ DeLéon Tequila, and the acquisition of Peligroso in the same month.

In December 2012, Diageo announced that it would not be acquiring Jose Cuervo Tequila after 18 months of negotiations, and revealed it would instead cease distributing the brand.

“I am delighted to have completed this acquisition which delivers on our strategy to build our presence in the world’s fastest growing markets and to invest behind the biggest growth opportunities,” said Ivan Menezes, CEO of Diageo.

“Tequila is an important global category with tremendous growth potential and with the purchase of Tequila Don Julio we now have full ownership of a leading ultra-premium brand.”

The deal also gives Diageo full ownership of the La Primavera distillery, its inventory and agave supply.

Diageo said the acquisition will allow it to “make investment decisions across supply, marketing and innovation to support the continued growth of the brand”.

“This transaction marks a significant milestone for Diageo in Mexico,” said Erik Seiersen, managing director of Diageo Mexico.

“It transforms our business as a leading local employer, producer, and exporter of one of Mexico’s most important products and reinforces our leading position within premium spirits with the return of Smirnoff and the addition of Tequila Don Julio in its entirety to our portfolio.”

In relinquishing its Bushmills brand, Diageo is left without a presence in the fast-growing premium Irish whiskey category, however Euromonitor analyst Jeremy Cunnington said the move made “strategic sense”, and is a “win win” for both companies.

Bushmills sold 800,000 cases worldwide in the year to June 2014, generating £57m for Diageo, while Don Julio reported 800,000 case sales in the year to June 2014, with revenues of £105m.