Diageo, Casa Cuervo agree whiskey-tequila brand swap deal

By Mark ASTLEY

- Last updated on GMT

Diageo, Casa Cuervo agree whiskey-tequila brand swap deal

Related tags Diageo

Diageo has agreed to sell its Irish whiskey brand Bushmills to Casa Cuervo in exchange for full ownership of the Mexican distiller's Don Julio tequila brand. 

Under the deal, announced earlier today, Mexico City-based Casa Cuervo, the company behind Jose Cuervo tequila, will hand over its 50% stake in the Don Julio brand and US$408m (£255m, €326m) in cash to Diageo.

In return, Jose Cuervo Overseas will acquire Diageo's whiskey brand, Bushmills.

Diageo also announced the "early termination"​ of its licensing agreement that permitted Casa Cuervo to produce and distribute Smirnoff vodka in Mexico.

The deal, subject to certain approval, is expected to close in early 2015.

The six variants of Don Julio tequila brought in revenue of £105m (US$168m, €134m) in the 12 months ended June 30 2014.

Diageo, which has held a 50% interest in the brand since 2003, secured £75m (US$120m, €96m) of these sales.

Commenting, Ivan Menezes, CEO, Diageo, said the swap deal with Casa Cuervo "delivers two key objectives."

“We have secured our position in the growing super and ultra-premium segments of tequila category and further strengthened our global footprint by expanding our leading position in Mexico where the growth of spirits has great potential,”​ said Menezes.

“Diageo has realized this opportunity through the breadth and depth of our portfolio. It delivers our strategy: to build our presence in the world’s fastest growing markets and lead the industry in the biggest growth opportunities. I am delighted we have reached this agreement.”

Today's brand swap is just the latest attempt by Diageo to establish itself in the premium tequila category. 

In January 2014, Diageo formed a joint venture with Sean 'P Diddy' Combs to acquire the prestige DeLeón tequila range, which includes variants that retail for more than US$1,000 (£625, €800) a bottle. 

Just weeks later it added ultra-premium tequila brand, Peligroso, to its portfolio.

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