Diageo has confirmed that it will buy Casamigos, a tequila brand cofounded by George Clooney, in a deal that values the brand at $1bn and is expected to close in the second half of 2017.
Clooney, Rande Gerber, and Mike Meldman created the ultra premium tequila brand in 2013, and the brand has registered a CAGR of 54% in the last two years, reaching 120,000 cases sold in 2016 and on track to sell over 170,000 cases by the end of 2017.
Clooney told CNBC that he and the original founders will remain involved in the business development of Casamigos.
“With the global strength of Diageo we expect to expand the reach of Casamigos to markets beyond the US to capitalize on the significant international potential of the brand,” Ivan Menezes, CEO of Diageo, said in a statement.
The transaction values Casamigos at up to $1bn, with initial consideration set at $700m and a further potential $300m based on a performance linked earnout over 10 years. The acquisition will be funded through existing cash resources and debt.
“We expect the acquisition will be economic profit positive in the fourth full fiscal year postcompletion,” Diageo said in a statement.
Playing in fastgrowing tequila category
Diageo has maintained its focus on the premium tequila market since acquiring the Don Julio tequila brand for $408m in 2014.
“It supports our strategy to focus on the high growth superpremium and above segments of the category,” Menezes said.
The global tequila market has experienced strong growth with volume sale of super and highend varieties increasing by 706% and 292%, respectively, since 2002 – an average rate of 5.7% per year, according to Distilled Spirits Council data.
Diageo’s pattern of acquisition
Euromonitor senior alcoholic drinks analyst, Spiros Malandrakis, told BeverageDaily that the acquisition is not surprising considering Diageo’s past acquisitions of celebritybacked products such as Ciroc vodka and Haig Club Scotch Whisky.
“Diageo has this historic fascination with celebrityfronted products,” he said.
The big question concerns the amount Diageo spent on the purchase of Casamigos, Malandrakis claimed.
“There is no question that this is a solid brand as it stands already,” he said. “It is just a matter of if the investment makes sense in the context of how much they paid for it.”
“At the moment, I think we are going to have to wait and see.”
Source: Beverage Daily
