Diageo to spend $500m on Tequila expansion

Don Julio owner Diageo will invest more than US$500 million in expanding its Tequila production in Mexico.

The investment will be used to expand its manufacturing footprint with new facilities in Jalisco, Mexico. Construction is expected to begin next year.

Diageo said the move will boost the company’s growth in the Tequila category.

Diageo is the owner of million-case Tequila brands Don Julio, which it acquired in 2015 from the producer of Jose Cuervo, and Casamigos, co-founded by actor George Clooney and sold to the drinks giant in 2017 in a deal worth up to US$1 billion.

“In fiscal 21, Diageo’s Tequila organic net sales grew 79% with the category now representing 8% of the company’s organic net sales,” said Álvaro Cárdenas, president, Latin America and Caribbean, Diageo.

“Growth was primarily driven by North America, where Tequila is benefitting from its broad appeal across consumer occasions. This exciting investment in Mexico will support our future category growth to meet Mexican and international demand.”

In July 2021, Diageo CEO Ivan Menezes said he expects Tequila’s growth to be “steady”, “not explosive”, in markets beyond North America.

The new plant will also support the company’s 10-year sustainability action plan, Society 2030: Spirit of Progress, by utilising environmentally friendly technology. Furthermore, the facility will create more than 1,000 local jobs.

Diageo said it had finished the first expansion of its facilities at El Charcón in Atotonilco El Alto, Jalisco, in 2019. This enabled the creation of additional jobs and helped the local community through initiatives including Hablemos de Emprendedoras, a programme for local female entrepreneurs.

In a trading update yesterday (30 September), Diageo reported a ‘strong start’ to its 2022 fiscal year, but the company expects ‘near-term volatility’ to continue.

Diageo recently expanded its agave spirits portfolio with the purchase of Casa UM, owner of the Mezcal Unión brand.