Diageo has agreed to acquire Casamigos – the premium tequila brand founded by Hollywood actor George Clooney – for up to $1 billion.
The deal includes an initial consideration of $700 million, with a further $300 million in performance-related earn-outs over ten years.
Diageo said the price reflects the brand’s ‘exceptional growth trajectory and upside potential’. Over the last two years, Casamigos has grown at a compound rate of 54% and is expected to grow production from 120,000 cases in 2016 to 170,000 cases this year.
Diageo North America president Deirdre Mahlan said: “I am excited by the opportunity to bring Casamigos into the Diageo portfolio, which allows us to further penetrate this exciting and high-growth category. We believe Casamigos will play a complementary role alongside Tequila Don Julio.”
Casamigos founders Rande Gerber, George Clooney and Mike Meldman will continue to play a role in the business. Diageo said it ‘looks forward to partnering with them to realise the full potential of the brand. Clooney said that he would celebrate the deal ‘with a shot… maybe two’.
Diageo chief executive Ivan Menezes added: “We are delighted to announce this transaction today to extend our participation in the tequila category. It supports our strategy to focus on the high-growth super-premium and above segments of the category. With the global strength of Diageo we expect to expand the reach of Casamigos to markets beyond the US to capitalise on the significant international potential of the brand. We look forward to building on the remarkable success of Casamigos to date.”
Casamigos was founded by Rande Gerber (back, left) and Clooney.
Analysis: ‘a nice fit’
By Alex Clere
This is a nice fit for Diageo. In the four years since its inception, Casamigos has built itself a global reputation. In Diageo’s words, it has ‘an authentic brand identity with a smooth and accessible taste profile’ and, seemingly, plenty of room to grow. Of the 120,000 cases it distributed last year, most of them were in the US, meaning that the brand is still prime for international expansion – indeed, the global spirits company has signalled its intent to launch Casamigos in new markets outside North America. That’s where Diageo will be able to leverage its strengths and existing resources, and quite possibly open a new chapter of growth for the premium brand.
Casamigos co-founder Rande Gerber said: “We are extremely excited to team up with one of the largest, most respected spirits companies in the world. What started from a friendship and an idea to create the best tasting, smoothest tequila as our own house tequila to drink and share with friends has quickly turned into the fastest growing super-premium tequila. Casamigos has always been brought to you by those who drink it and we look forward to continuing that, working alongside the expertise and global reach of Diageo. Now even more people will be able to enjoy and experience our love and passion for Casamigos.”
In particular, Diageo will be able to widen its presence in the premium end of the tequila market. Global tequila volumes grew 6.9% last year, demonstrating continued interest in the spirit, with further growth expected to return $9 billion a year in tequila revenues by 2021.
And it’s the premium segment that’s dominating that surge, with close to 42% of the market share in 2016.
Much of the demand is concentrated in North America, but Europe is increasingly emerging as a lucrative export destination while Asia-Pacific is the fastest growing region in the global tequila market. That seems to justify Diageo’s decision to invest in a brand to expand internationally.
Manjunath Reddy, an alcohol research expert for Technavio, said: “Consumers are demanding innovative and exotic flavours in their drinks. The introduction of new flavours by major players to cater to the changing taste preference of consumers is boosting the demand for tequila.”
And Reddy pinpointed celebrity endorsements, such as Clooney’s involvement in Casamigos tequila, as a contributor to growth.
The transaction is expected to be completed in the second half of the year.
© FoodBev Media Ltd 2019