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Diageo goes ‘back to basics’ with Casamigos
After a double-digit sales drop for Casamigos Tequila, Diageo is hoping to boost the brand’s “low” consumer awareness through a new campaign.
Diageo’s organic sales rose by 1% for the last six months of 2024, with Tequila soaring by 21%.
Casamigos saw its sales tumble by 21% but its stablemate Don Julio skyrocketed by 50% after the brand’s US sales soared by 61%.
Founded by actor George Clooney, Rande Gerber and Mike Meldman in 2013, Casamigos was sold four years later to Diageo in a deal worth up to US$1 billion.
Speaking at a briefing for Diageo’s first-half results in London, CEO Debra Crew highlighted that Casamigos has been one of the fastest-growing spirits brands in the past five years with double-digit growth rates between 2019 and 2022.
It had an “incredible uptick in growth for several years” she explained, during a period she called the “Covid super-cycle time”.
However, growth has slowed in recent years as the company struggled to keep up with supply. “These numbers were big… and demand was outstripping supply. So we did have some out of stocks on it as well, which I think competition took advantage of.”
Crew described Casamigos as “still a young brand” with “lower consumer awareness” compared to stablemate Don Julio and other competitors such as Bacardi-owned Patrón that “have been in the market for a long time”.
To drive brand awareness, the company will launch a new Casamigos campaign next month, details of which are currently under wraps.
Crew noted a “real opportunity to really build up the brand” with Casamigos moving into “Diageo-dedicated divisions within our distributors” at the end of the group’s last fiscal year.
The CEO added that due to the abundance of products sold across the three-tier distribution system in the US, Diageo made the decision to “bring [Casamigos] into a more focused sales organisation”, which is “helping the brand tremendously” and resulted in more menu listings.
The company has gone “back to basics on Casamigos” and is “seeing green shoots off of that”, she explained.
Casamigos was the world’s fourth biggest-selling Tequila in 2023 with case sales of 3m, while Don Julio was the second largest at 3.4m cases, following Jose Cuervo.
Tequila continues to boom
The Tequila category is still on the rise, as other spirits segments struggle, but overall growth has slowed from the category’s previous double-digit rates.
The Diageo CEO pointed out that the Tequila category is “growing plus-6% in the US and has been pretty steady across the last year”.
Crew also described the opposing sales figures for Casamigos and Don Julio as “more of a brand-specific issue”.
She highlighted Casamigos as a “very accessible liquid” with the brand’s blanco expression being a “key part” of the portfolio and playing well in cocktails.
Don Julio, on the other hand, plays more in “aged Tequila” – which represents 80% of the brand, Crew said. “Reposado is a big part of the story”, she added, noting “we’ve doubled the size of just reposado alone”.
Don Julio is “constructed quite differently from other Tequila brands”, said Crew, who notes “a lot of opportunity” for further growth.
She emphasised the brand’s growth potential: “We see it can do a lot more. It’s only 5% household penetration on a category that has 33% household penetration. So a lot of opportunity.”
“Also, both of these brands around the world are doing well,” she said, claiming that Casamigos is “doing quite well” in the UK, while Don Julio is “the number one Tequila” in the market.
Global growth opportunity
Diageo chief financial officer Nik Jhangiani told journalists at the briefing that the company now has a “two-brand strategy” in Tequila through “price ladders, taste profiles [and] cocktails versus straight drinking”.
He believes this “plays out really well” in terms of the global growth opportunity of the two brands, which are in “about 60 countries”.
Crew affirmed the company has a “good portfolio” in Tequila.
“I don’t know if I’m necessarily looking for a new brand,” she contemplated, highlighting the numerous brand launches in the category. “I do think some of that’s going to scale back.” She noted there is “a little bit of scepticism” among retailers. “There’s just been so many new launches so I would anticipate there be a few less on the flip side of that.”
On 1 February, just prior to the release of Diageo’s first-half results, US president Donald Trump agreed to delay introducing 25% tariffs on Mexico and Canada for 30 days.
Regarding the forthcoming 25% US import tax on Mexican products, Crew cited the group’s fortunate position with its “broad portfolio and supply chain”, adding “we can navigate this better than people who don’t really own their supply chain”.
She called the tariff threat a “very fluid situation” that could “no doubt have an impact, or further impact on the consumer environment”.
The CEO said the company continues to “engage with the US administration” and the Mexican, Canadian and UK governments regarding the tariff situation.
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