Drinks conglomerate Diageo has offloaded Bushmills Irish whiskey to gain full control of Don Julio tequila from the Mexican company Casa Cuervo.
The asset swap will net Diageo $408m (£255m) and a bigger share of the fast-growing market for expensive tequilas. Sales of Don Julio, a brand with several premium varieties, have been growing by 25% a year.
Casa Cuervo, whose namesake brand is the world’s biggest-selling tequila, has also agreed to a premature end to its rights to make and distribute Diageo’s Smirnoff vodka in Mexico.
Diageo already owned 50% of Don Julio and has been expanding its tequila business, since efforts to take over Casa Cuervo failed in 2012.
The world’s biggest maker of spirits is keen to exploit consumers’ growing taste for the Mexican agave-based spirit. In the US, by far the largest market for tequila, where the drink is more popular than in Mexico, sales have more than doubled in a decade, hitting $2bn ($1.25bn) in 2013, according to the Distilled Spirits Council of the United States.
Sales have also been rising in the UK, where the drink is slowly shedding its reputation as a cheap liquor downed by shot-loving students with lick of salt and a grimace. Celebrities from George Clooney to Justin Timberlake have launched upmarket tequila brands, while rapper and record producer Sean Combs teamed up with Diageo to buy DeLeon tequila, which sells for up to $90 a shot.
Bushmills is brewed in County Antrim at what is claimed to be the world’s oldest distillery. Diageo took over Bushmills from Irish Distillers in 2005 for £200m, but the venerable whiskey brand, which traces its roots back to 1608, is less valuable than the Don Julio tequilas. While Bushmills sales earned Diageo £57m last year, Don Julio was worth £105m.
The asset swap is expected to be completed in early 2015.
Ivan Menezes, Diageo chief executive, said. “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.”
