US: Diageo, Jose Cuervo talks go on as deadline approaches

By | 6 November 2012

Diageos tie-up with Jose Cuervo expires in June next year

Diageo's tie-up with Jose Cuervo expires in June next year

The head of Diageo's operations in Latin America and the Caribbean has warned that he would “hate to lose” the Jose Cuervo Tequila brand, as the end of the company's current agreement looms.

Cuervo, which is owned by the Beckmann family, has been handled by Diageo outside of Mexico since before Diageo's creation in 1997. The current incarnation of the sales, marketing and distibution tie-up, which began in 2002, expires in June next year, with discussions between the two still ongoing after more than a year.

Speaking to media in Miami yesterday (5 November), ahead of today's investor conference, Randy Millian, Diageo's president of LatAm and Caribbean (LAC), said: “I would hate to lose Cuervo.” He added, however, that he remains optimistic that a renewal would be secured. “I think Cuervo's a phenomenal brand and to have it in our portfolio would be great,” he said. “But, it's got to be a deal that makes sense for our shareholders and their shareholders. And we're still discussing it.”

“I wouldn't have survived in Latin America without being optimistic,” he continued. “I have optimism about everything. I'd be optimistic about this, but that doesn't mean it's going to happen.”

When asked what the company would do if a new deal could not be agreed, Millian said: “We have plan B's, but we don't want to get into that, because our plan A is very clear.”

Earlier this year, an analyst at Nomura said that a new deal between Diageo and the Beckmanns, possibly a brand purchase in the form of stock rather than cash, would be more likely as a result of other recent transactions in Mexico. Anheuser-Busch InBev's buy-out of Grupo Modelo in June and Heineken's acquisition of FEMSA Cerveza two years ago, “strengthens Diageo’s hand in negotiations on the Jose Cuervo brand," Nomura said.

Expert analysis

Tequila & Mezcal in Emerging Markets to 2015: Market Guide

Synopsis Canadean’s, "Tequila & Mezcal in Emerging Markets to 2015: Market Guide" provides in-depth detail on the trends and drivers of the Tequila & Mezcal market in Emerging Markets. The report includes quantitative information (historic and forecast market values). The report provides data, analyses and opinion to help companies in the Alcoholic Drinks industry better understand the changes in their environment, seize opportunities and formulate crucial business strategies. Summary This report is the result of Canadean’s extensive market research covering the Tequila & Mezcal market in Emerging Markets. The report provides a top-level overview and detailed insight into the operating environment for the Tequila & Mezcal market in Emerging Markets. It is an essential tool for companies active across the Alcoholic Drinks value chain and for new players that are considering entering the market. Scope • Overview of the Tequila & Mezcal market in Emerging Markets. • Analysis of the Tequila & Mezcal market and its categories (where applicable), including full year 2010 consumption value and forecasts until 2015 • Historic and forecast consumption values for Tequila & Mezcal for the period 2005 through to 2015 Reasons To Buy • The report provides you with important figures for the Tequila & Mezcal market in Emerging Markets with individual country analysis. • The report will help you to identify trends by analyzing historical industry data. • The report will help you analyze the market with detailed historic and forecast market values, segmented at category level (where applicable). • The report will help you to enhance your knowledge of the market with key figures on consumption value and segmentation by category for the historic period. • The report will help you to plan future business decisions using forecast figures for the market. Key Highlights NA

Sectors: Mergers & acquisitions, Spirits

Companies: Diageo, InBev, Modelo, Heineken, FEMSA

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