Diageo invests $400m in Don Julio’s futureBy Becky Paskin
Just days after completing its acquisition of Don Julio Tequila, Diageo has pledged to invest US$400 million to expand production facilities and agave farming capacity in Mexico.
The investment, which will be injected over the next five years, will be used to expand distillation, bottling and water treatment facilities in Jalisco, as well as increase its agave farming capabilities.
Diageo also intends to build a heritage centre at Atotonilco in Jalisco, which combined with the above work, will create around 400 jobs within Diageo Mexico, plus an additional 200 indirect roles within three years.
The sum will also be used to increase the brand’s advertising and promotional spend.
Ivan Menezes, CEO of Diageo, who announced the investment during the state visit of Mexican President Enrique Pena Nieto to the UK, said Mexico “will form an important part of Diageo’s future”.
“This investment reaffirms our long-term commitment to Mexico and we look forward to playing a bigger role in the industry, investing in our people and communities and supporting wider economic development,” Menezes added.
The news comes just months after Diageo suspended its planned £1bn investment in increasing the production capacity of its Scotch whisky operation.
In October last year the group blamed a “weaker global economic environment” for poor growth of Scotch in certain markets. As such it announced an “adjustment in the timing” of its investment programme.
However, as far as Tequila is concerned, Diageo is keen to develop its footprint in Mexico, the spirit’s home and largest market, where the number of legal drinking age consumers is expected to grow to 64% over the next four years.
Sales of Don Julio Tequila grew by 21% in the first six months of Diageo’s 2014/15 financial year, as the brand “continued to gain market share” in the US super-premium Tequila category.
Diageo completed its acquisition of the remaining 50% stake in Don Julio it did not own from Jose Cuervo on 27 February. As part of the deal, Diageo passed Irish whiskey brand Bushmills across to the Mexican drinks group.