The breakdown in negotiations for the world’s largest tequila brand (3.9m 9-litre cases per year) has also ended the pair’s distribution agreement, effective June 2013.
Diageo currently markets and distributes the brand outside of Mexico.
With Jose Cuervo in transition to leave, the smaller Don Julio brand is now the sole tequila in Diageo’s portfolio.
Paul Walsh, chief executive of Diageo said: “Diageo has had a long and successful relationship with the Cuervo brand and we are proud of what we have achieved for the brand as its distributor over many years.
“We believe that the future of the brand would be best delivered by aligning ownership of the brand with its route to market and I have no doubt that Diageo has the best route to market for this brand.
“However 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.”
According to a statement, both parties will “now work to ensure the orderly termination of the current distribution agreement, including transitional arrangements”.
