Comment - Spirits - Jose Cuervo to go to Diageo?

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No sooner had I penned some ponderings on yet another 'Diageo in move to buy...' story yesterday, as (yet) another one came along.

After last week's news that Diageo is in the running to acquire Stock Spirits, a report in a Sunday paper here in the UK last weekend suggested that the drinks giant will look to take full ownership of the Jose Cuervo Tequila brand. According to The Sunday Times, Diageo, which distributes Jose Cuervo for the Beckmann family outside of its native Mexico, will spend US$2bn to bring the Tequila in-house.

The Beckmanns, the report said, are in discussions with Barclays to “explore a possible sale of all or part of the group”.

While the paper did not disclose its sources, and Diageo was not available for comment yesterday, it's perfectly possible that there might be something to this report.

When Fortune Brands confirmed late last year that it plans to split its businesses, and hold on to its Beam Global Spirits & Wine unit, the M&A rumour-mill went into overdrive. Of course, people speculated, a restart to the consolidation of the global spirits industry is now pending, with Beam Global set to be the bait on the hook for the likes of Diageo, Pernod Ricard and Bacardi.

Were this to happen, then, with Beam Global's Sauza Tequila brand in the equation, where would this leave the Beckmanns?

As one analyst pointed out yesterday, the Beckmanns might be “anxious” if Diageo did buy Beam Global, and then dropped Cuervo in favour of Sauza. Could the family's reported approach of Barclays be a sign of this angst?

For what it's worth, my take on the report is that it's a flare thrown up by the Beckmanns to see the lay of the land.

It's not a particularly bright flare, though. After all, while the three companies suggested in the piece as possible competition for Jose Cuervo are Diageo's most obvious rivals in the spirits industry as a whole, I seriously doubt that either Bacardi, Pernod or Brown-Forman would get involved in a battle to buy Jose Cuervo.

Bacardi will be quite happy, I'll wager, with its stake in Patron, as will Brown-Forman with its ownership of both Herradura and El Jimador, while Pernod, as I know first hand, isn't looking to buy anything for the time being.

Besides, with Diageo's distribution deal for Jose Cuervo set to run until June 2013, this story looks like it'll run for a while longer yet.

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