Bushmills will be sold to Jose Cuervo Overseas in exchange for the half of Tequila Don Julio that Diageo doesn’t already own, London-based Diageo said in a statement today.
“It’s a sensible deal,” Eddy Hargreaves, an analyst at Canaccord Genuity, said by phone. “They do get control of one of the few major tequila brands globally, which is something they’ve been trying to achieve for a number of years.”
The deal is a continuation of Diageo increasing its focus on more expensive liquor to boost profitability. The world’s largest distiller ended talks two years ago about the future of the Cuervo tequila brand, which it was said to have an option to buy. In 2003, it sold 50 percent of the ultra-premium Don Julio brand to Cuervo.
“Today’s deal tidies up the whole arrangement with Cuervo,” Ian Shackleton, an analyst at Nomura International Plc, said by phone. “Don Julio and Bushmills are both good brands. There’s no doubt that today Don Julio has much more a premium, even ultrapremium aspect” as a bottle can cost about three times as much as that of Bushmills.
For Diageo, the deal delivers two key objectives, Chief Executive Officer Ivan Menezes said in the statement. “We have secured our position in the growing super and ultra-premium segments of the tequila category and further strengthened our global footprint by expanding our leading position in Mexico where the growth of spirits has great potential.”