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.