Diageo, the world’s largest liquor distiller, has agreed to sell the 406-year-old Bushmills Irish whiskey to Jose Cuervo Overseas and spend $408 million so that it can have full ownership of Tequila Don Julio, which it had only owned half of previously. Don Julio is the market leader in ultra premium tequila, and Diageo has decided to go all in on riding the brand to higher revenues.
Don Julio joins Diageo's robust roster of spirits which includes Johnnie Walker, Crown Royal, Smirnoff, Ketel One, Baileys, Captain Morgan, Tanqueray and Guinness.
“It’s a sensible deal,” Eddy Hargreaves, an analyst at Canaccord Genuity, told Bloomberg. “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.”
Bloomberg also reports that Diageo isn’t planning to revive talks with Jose Cuervo to buy the Cuervo tequila brand, something that was alive back in 2012.
This acquisition is part of Diageo’s larger plan to put more effort behind more expensive liquor products in order to increase its profitability. A bottle of Don Julio can cost as much as three times as much as a Bushmills. Don Julio brought in $167 million in the last fiscal year while Bushmills, the third largest Irish whiskey brand, pulled in $91 million
Though the deal won't be complete until next year, Diageo is confident that the market for ultra premium tequila will thrive. “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,” Chief Executive Officer Ivan Menezes said in a statement, an observation echoed by Management Today which notes that Mexico's growing middle class is a prime target for tequila brands.
In another indication that the whiskey world is changing: a Japanese whisky, Yamazaki Single Malt Sherry Cask 2013, was named the best in the world for the 2015 World Whiskey Bible, the Telegraph reports. This is the first time in the book’s 12-year history that a Japanese whisky has taken the top spot.
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[Image via Diageo]