Belfast Telegraph

Diageo sells Bushmills whiskey for full control of high-end tequila

By Margaret Canning

Global drinks company Diageo has denied it's been "defeated" in the Irish whiskey market after it sold Bushmills in return for a high-end tequila.

Diageo, which also owns Guinness, Smirnoff, Harp and Baileys, has acquired Tequila Don Julio from Casa Cuervo in Mexico in return for the heritage Co Antrim whiskey.

Diageo already owned 50% of Don Julio - known to connoisseurs as the 'champagne of tequilas' - outside Mexico.

But by the beginning of next year it will own the lot - and will also have bought back the distribution network for Smirnoff in Mexico from Casa Cuervo.

Jose Cuervo Overseas will also pay Diageo $408m when the deal completes early next year.

Both strands of the deal will give Diageo a strong foothold in the growing drinks market of Mexico, according to operations director Colin O'Brien.

And Casa Cuervo will own the distillery in Bushmills - which employs 103 people.

It confirmed that there would be no job losses and the current management structure would remain.

But Olly Wehring, editor of just-drinks.com, claimed the sale of Bushmills, which Diageo has owned for nine years, did not reflect well on its present owner.

"Not only is Diageo admitting defeat in Irish whiskey, it is also chasing shorter-term trends than longer-term ones.

"And, I'm not sure that this approach is what has made the company the powerhouse it has been in recent years."

But a Diageo spokesman said: "This is not about admitting defeat.

"Bushmills has been a successful brand for Diageo, having grown at a companied annual rate of 11% since we acquired it.

"This transaction is about realising the significant opportunity that tequila and Mexico represent for the business."

He said Bushmills did not leave a gap in its whisky portfolio - but instead the "breadth and depth" of the portfolio allowed it to "participate in all consumer occasions".

He added: "We know the Irish whiskey category is in growth and we have grown Bushmills by 7% in the last fiscal year.

"But this is about realising an opportunity to expand our position in tequila and our presence in a critical emerging market."

He said the growth potential of tequila posed greater long-term benefit to Diageo.

"Selling Bushmills enabled us to access this particular opportunity in a way that is consistent with our strategy and complements our brand portfolio."

A Northern Ireland drinks industry adviser, who did not want to be named, said it was "a good deal for Diageo. They are getting ownership of a super premium tequila that may at present produce less sales of actual cases and turnover but produces significantly more margin."

Bushmills has been heavily marketed by Diageo and has been the platform for gigs, including this year's Bushmills Live.

The industry is expected to look closely at who will be appointed to market the product. A spokesman for Jose Cuervo said: "We are committed to doing absolutely everything we can do ensure that Bushmills Irish Whiskey continues to thrive as a brand and we believe that marketing will play an important role in this."

Advisers Citi said it was an "excellent" deal for Diageo, describing Don Julio as "one of the leading super-premium tequila brands and is growing fast in a compelling segment".

Citi added: "Bushmills is not a big loss - the brand has been underperforming in the Irish whiskey category, where growth has been driven by Jameson, which transcends the category. Consumers see Jameson as a brand rather than an Irish whiskey."

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