MEXICO/UK: Diageo to quit Jose Cuervo deal

Talks between Diageo and the Beckmann family have collapsed, leaving the latter without a global distributor for its Jose Cuervo Tequila brand and the former with a clear gap in its spirits portfolio.

In a five-sentence statement, released this morning (11 December), Diageo said that talks with JB y Compania SA de CV and Lanceros SA de CV have closed without agreement, with the current distribution tie-up set to end in June. just-drinks understands that the UK company offered an equity stake worth between US$3.2bn and $3.6bn in return for ownership of the brand.

Diageo handles the sales marketing and distribution of Cuervo, which was founded and is owned by Mexico's Beckmann family, in all markets apart from Mexico.

“We believe that the future of the brand would be best delivered by aligning ownership of the brand with its route to market,” said Diageo's chief executive, Paul Walsh. “I have no doubt that Diageo has the best route to market for this brand.

“However,” he added, “it has not been possible to agree a transaction which delivers value for Diageo’s shareholders and therefore, by mutual agreement, we have terminated our discussions.”

When contacted by just-drinks, a spokesperson for Diageo declined to comment further on the statement, but highlighted that the company still has the Don Julio Tequila brand in its portfolio.

The announcement comes two days after reports linked Diageo to a joint-bid for the owner of the Sauza Tequila brand, Beam Inc. The Sunday Telegraph in the UK said over the weekend that the UK firm had discussed making an offer with Japan's Suntory Holdings.

Tequila accounts for around 3% for Diageo's annual net sales volumes. In the company's last fiscal full-year, to the end of June, the Jose Cuervo brand saw net sales slide by 5% year-on-year, with volumes dipping by 4%.

To read the company's official statement, click here.