Yesterday Diageo announced it had taken 100% control of its tequila Don Julio and terminated Casa Cuervo’s production and distribution of Smirnoff in Mexico in exchange for Bushmills and $408 million.
“They think there’s greater promise in super premium tequila than in Irish whiskey, which is still a very small category, dominated by one brand,” said Cunnington, a drinks analyst.
“Is it the Irish whiskey category or the Jameson category? With this move Diageo is saying it’s the Jameson category – though William Grant & Sons might have something to say about that. To compete with Jameson though, requires time and resources. It is easier for Diageo in tequila and the category is bigger.”
Cunnington added that the group prefers to have total control over its brands and that sacrificing Bushmills to fully run Don Julio and Smirnoff operations would have come down to numbers.
“They have bright people at Diageo. They will have crunched the numbers and made the call,” said Cunnington.
Smirnoff’s volume and net sales in Mexico in the year ended 30 June 2014 were 285,000 cases and £9m respectively. Bushmills global volume and net sales were 800,000 cases and £57m in the same period.
