Friday, March 1, 2013

Diageo Loses Cuervo to Proximo

This has little to do with whiskey directly, but it's a big news day for people who follow the distilled spirits business, and anything that shakes up the industry this much is bound to affect whiskey at some point.

Today The Big Galoot (my pet name for Diageo) got a little smaller, as the other shoe dropped in the ongoing saga of Diageo and Jose Cuervo Tequila in the U.S. market.

Here's the synopsis of our story thus far. Jose Cuervo is far and away the best selling tequila in the U.S., fluctuating in recent years between 3.5 and 3.9 million cases, and trending down. Diageo doesn't own Cuervo, it's merely the distributor, and that contract ends June 30. Diageo tried to buy Cuervo from its owners, the Beckmann family, but that fell apart in December.

So the question has been, what's next for Cuervo? A new distribution deal with Diageo? Someone else? A sale to someone else? Or self-distribution?

Five years ago, the Beckmanns established a distribution company in the U.S. called Proximo Spirits, which sells 1800 Tequila, 3 Olives Vodka, and other small brands. Taking on Cuervo will more than double Proximo's size, so that was by no means a sure thing. It is, however, the choice announced today.

Proximo's only whiskey property is Stranahan's Colorado Whiskey, which is tiny compared to Cuervo but probably the biggest micro-distillery whiskey in the country.

Diageo, meanwhile, will fight back by promoting its other tequilas, principally Don Julio. The other challenge for Cuervo is the current glut of inexpensive, 100%-agave tequilas on the market. The other story this may impact is the ongoing speculation that Diageo will make a play for Beam Inc. Jim Beam itself is the prize, but does the fact that Beam owns Sauza, the #2 tequila, make such a move more or less likely? Only time will tell.

6 comments:

Anonymous said...

Richnimrod says;
Hmmmmmmm, Veeeeery interesting indeed. For my dough the Sauza is a better deal, and certainly a better bargain in terms of value per the dram; not that I drink very much Tequila; and not that I'd ever be anybodies valued opinion on 'em.

Anonymous said...

Proximo Spirits owns and operates bottling facility in Lawrenceburg Indiana. MGPI distills and ages whiskey in same town. Proximo could contract with MGPI to make private label whiskies to add to their product line.

Doctor Tarr said...

How long ago was 1600 tequila split from the Cuervo line?

Chuck Cowdery said...

It's 1800 and I'm not sure but presumably it was about five years ago, when Proximo was formed to market it.

Doctor Tarr said...

A typo. I was surprised to not be able to find the date or even year online, but it makes sense that the split happened so they could retain it.

I am only an occasional tequila drinker, so I am not familiar with the relative merits of the brands.

Waiahi said...

I am only an occasional tequila drinker, so I am not familiar with the relative merits of the brands.

It's really quite simple.

Jose Cuervo and Sauza are both mixto - i.e. at least 51% agave spirit, 49% sugar alcohol (rot gut rum).

This is why those cheap tequila's give such god awful hangovers.

They are also why Tequila has such a bad reputation to casual drinkers...although the popularity of Patron (the Maker's Mark of Tequila!) has raised Tequila's reputation a bit, most people's experiences with drinking tequila straight is the whole lime salt shooter deal with a cheap mixto tequila.

It took me 10 years and a vacation in Mexico to finally get me to try drinking tequila neat again. That's when I found out just how vile Jose and Sauza really are.