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Casamigos tequila

Diageo buys George Clooney tequila brand for $1bn

George Clooney may be the face of fancy coffee, but it’s in premium tequila that he’s just hit the real jackpot.

Diageo has agreed to acquire fast-growing tequila brand Casamigos, co-founded four years ago by Clooney, for as much as $1-billion. The deal expands the London-based distiller’s lineup in a fast-growing category, where it already owns the Don Julio, DeLeon and Peligroso brands.

The purchase will be Diageo’s biggest since its $3.2-billion acquisition of United Spirits in 2014. After that deal boosted its presence in India, the owner of the Smirnoff brand is moving to strengthen its US business, which has returned to growth after a difficult stretch following a slowdown in vodka sales. Meanwhile, tequila volume in the US more than doubled from 2002 through 2015, according to the Distilled Spirits Council.

Clooney, the actor better known for his role in movies such as “Ocean’s Eleven” and as a pitchman for Nespresso coffee, created Casamigos in 2013 with developer, Mike Meldman, and entertainment entrepreneur, Rande Gerber, who’s married to model Cindy Crawford.

They got in on the tequila boom after tasting together in Cabo San Lucas, Mexico, where Clooney and Gerber had built vacation homes.

Now they’re cashing out with an initial consideration of $700-million that could be followed by a further potential $300-million based on a performance-linked earn-out over 10 years, according to a Diageo statement.

‘High’ Price

“The price looks high,” Trevor Stirling, an analyst at Sanford C Bernstein says. “So much of this depends on their belief in the growth rate of this brand.”

Casamigos is growing at 40 percent to 50 percent and is on track to sell 170,000 12-bottle cases this year, Diageo North America President Deirdre Mahlan says. That compares with about 26 million cases of Smirnoff vodka Diageo sells annually. 

Brands growing at such a pace are “notoriously challenging to value under traditional methods,” Mahlan said. 

Casamigos, packaged in clear bottles with Clooney’s signature adorning the label, is distilled by an undisclosed partner in Mexico. Casamigos is sold in three expressions, at $45 to $55: Blanco, which is clear, Reposado, which is golden-colored, and Anejo, a dark amber variant and the brand’s oldest.

The brand has been marketed with pictures of the founders enjoying it, captioned with the slogan, “Brought to you by those who drink it.” Clooney, Gerber and Meldman will continue to promote the brand. Their stakes in the business have not been disclosed.

Drinkers are increasingly drawn to alcohol with a Mexican heritage amid a change in the way it’s served: bartenders in the US are stocking more expensive tequilas fit for sipping neat rather than mixing in margarita cocktails. In response, Diageo and its rivals have been expanding their lineups of tequila and mezcal, both of which are produced from the agave plant.

Pernod Ricard SA this month agreed to acquire Del Maguey mezcal, following a distribution agreement by Diageo with Mezcal Union signed in February 2016.

Source: Bloomberg