Dive Brief:
- Diageo has agreed to purchase Casamigos, the fastest-growing super-premium tequila brand in the U.S., for up to $1 billion. (The deal includes $700 million upfront and another $300 million to be paid out if certain performance incentives are hit over 10 years.) The spirits company said the acquisition is "an exciting opportunity" for Diageo to strengthen its focus in the fast-growing tequila category. Diageo plans to grow the brand internationally.
- Casamigos, which means "house of friends" in Spanish and is partly owned and co-founded by actor George Clooney, has delivered "impressive growth," according to the company. Diageo said the purchase won't add to its earnings until the fourth year after the deal closes.
- "If you asked us four years ago if we had a billion dollar company, I don't think we would have said yes," George Clooney told CNBC via email. "This reflects Diageo's belief in our company and our belief in Diageo. But we're not going anywhere. We'll still be very much a part of Casamigos. Starting with a shot tonight. Maybe two."
Dive Insight:
The purchase of Casamigos seems like an ideal acquisition for Diageo, known for its roster of spirits including Captain Morgan, Smirnoff and Johnnie Walker. It allows the company to add a fast-growing super-premium tequila product, while giving it plenty of growth to tap into as the London-based Diageo expands the brand's reach outside of the United States.
Casamigos, founded by Clooney and two friends in 2013, has benefited from the growing demand for tequila and other spirits. Since 2002, tequila volumes have grown 106%, an average rate of 5.7% per year, according to the Distilled Spirits Council of the United States. Liquor makers sold more spirits and mixed drinks in 2016 than the year before, but global alcohol volumes of all types still fell 1.4%, according to The Wall Street Journal. As the data shows, spirits are one of the few areas in alcohol posting growth, making the opportunity for Diageo to buy a brand like this all the more attractive — even if it will be at least three years before it adds to its earnings.
“We are delighted to announce this transaction today to extend our participation in the tequila category," Ivan Menezes, Diageo's chief executive, said in a statement. "It supports our strategy to focus on the high growth super-premium and above segments of the category."
This tequila has a unique asset tied to the brand: George Clooney. The actor told CNBC he will continue to be involved in Casamigos even after the deal closes. Diageo will be smart to capitalize not only on the growing interest in spirits, but Clooney's popularity around the world to help make a name for the brand in markets where it isn't well known.
Diageo is no stranger to celebrity partnerships, having work extensively with rapper-turned-business mogul Sean Combs after they first joined forces in 2007 and he became the face of its Ciroc vodka. The joint marketing and profit-sharing deal contributed to a nearly 40-fold rise in annual sales volumes for the brand's products, according to Bloomberg. Diageo can only hope Clooney can do the same with Casamigos.