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Diageo trades Bushmills for Don Julio

Diageo has bolstered its stake in the global luxury Tequila market by acquiring the Don Julio brand from Casa Cuervo in exchange for Irish whiskey Bushmills.

The deal, which gives Diageo full global ownership of Don Julio, also included the early termination of an agreement that had seen Casa Cuervo produce and distribute Diageo’s Smirnoff vodka brand in Mexico.

While last year’s figures show that Smirnoff’s business in Mexico generated sales of 285,000 cases worth £9m, the same period saw Bushmills achieve net sales of 800,000 cases and £57 million.

The agreement will see Diageo receive a net payment of $408 million upon its anticipated completion, subject to certain approvals, in early 2015.

This trading of assets follows the collapse of talks at the end of 2012 by Diageo to buy the Jose Cuervo brand. When it failed to come to an agreement with Jose Cuervo’s owners the Beckmann family, the drinks giant stepped up its focus on the Don Julio brand, in which it already owned 50% stake. Current annual volumes for Don Julio stand at 590,000 cases, worth £105 million.

Commenting on the deal, Diageo CEO Ivan Menezes said: “This transaction delivers two key objectives for us. We have secured our position in the growing super and ultra-premium segments of the Tequila category and further strengthened our global footprint by expanding our leading position in Mexico where the growth of spirits has great potential.

“Diageo has realised this opportunity through the breadth and depth of our portfolio. It delivers our strategy: to build our presence in the world’s fastest growing markets and lead the industry in the biggest growth opportunities. I am delighted we have reached this agreement.”

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