US: Brown-Forman wins Herradura race

Brown-Forman has emerged triumphant in the race to buy Tequila brand Herradura.

The US-based company confirmed yesterday (28 August) that it has reached agreement with Pablo Romo de la Pena and Jose Guillermo Romo de la Pena, owners of Grupo Industrial Herradura, to purchase the company's Tequila assets for US$876m.

The announcement brings to an end the battle for the Tequila brand, which over the last couple of months had seen Pernod Ricard and Bacardi allegedly also look at making an offer.

Brown-Forman will acquire the Herradura and El Jimador Tequilas and the New Mix Tequila-based RTD brand from the 136-year-old company. Other assets included in the purchase are Tequila production facilities and a sales and distribution organisation in Mexico.

"In Herradura and El Jimador, we are acquiring two strong brands competing at the super-premium and premium levels in the world's largest Tequila markets - the US and Mexico," said Brown-Forman's CEO Paul C. Varga.

"While Brown-Forman has had a variety of interests in Mexico for many years, the acquisition of Casa Herradura is our most significant investment in the country and will enable us to continue our company's international expansion."

Last year, around 380,000 cases of the Herradura were sold worldwide, about 70,000 of which were sold in the US. Nearly 1.4m cases of El Jimador Tequila were sold, including 150,000 cases in the US.

Tequila is one of the fastest-growing spirits categories in the US. Diageo's Jose Cuervo is the US market leader with around 43% of the market. Fortune Brands's Sauza is number two with about a 15% share, while Herradura has about 1%.

"We are very pleased with this agreement and believe Brown-Forman is the best company to grow our brands in the global spirits market," added Rafael Obregon, Casa Herradura's CEO.

Members of the selling Romo family will serve on Brown-Forman's Tequila Advisory Board to assist in the transition and growth of the brands.

The purchase is expected to be financed by cash and debt, and is expected to complete by the end of this year, subject to antitrust approvals.

In 2005, Casa Herradura reported net sales of around US$200m.