In terms of foreign ownership it would seem Mexico’s tequila industry is all but done and dusted. The American companies Beam-Suntory, Brown-Forman and Bacardi are in the thick of the action with their respective brands Sauza, El Jimador and Cazadores, while the French might Pernod Ricard owns the duo Avion and Olmeca – and that’s just for starters. 

So it’s something of a miracle that Cuervo, owned by the redoubtable Beckmann family, has managed to resist the financial overtures from Diageo – and it’s hats off indeed, as talks seem to have been going on for years. There has, of course, been the odd compromise along the way. The family Beckmann has parted with its remaining 50% of the super-premium contender Don Julio and has acquired the Irish whiskey Bushmills for the princely sum of US$408m. In so doing it agreed to the early termination of the production and agency agreement with Smirnoff in Mexico.

What, I hear you cry, would the world’s leading tequila producer want with an Irish whiskey? And why would Diageo absent itself from the dynamic Irish whiskey fray? It’s much easier to speculate about the latter, but I will say one thing – the Bushmills sell-off clearly indicates that Diageo is not in the brand-building business. Thank heavens some companies are, not to mention Pernod Ricard and its Irish champion Jameson – but more of that later.  

Diageo Stateside has been thrashing around trying to plug the hole left in its portfolio when it lost the distribution rights to Cuervo in the US last year. To this end at the beginning of the year Diageo added DeLéon and Peligroso, both high-end tequilas, to its portfolio. 

For instance, DeLéon’s five variants command prices from US$120 to US$1,000. So with the acquisition of Don Julio the company has now become a leading player in the super-premium tequila ferment that is 100% agave brews, the US$40-plus-plus-plus contenders which are fuelling tequila’s growth, and with superlative profit margins per case are adding very nicely to companies’ coffers. 

Last year the tequila category in the US rose by 3.5% to around 13.4m cases and that tally means, since 2010, sales have grown by a very healthy 2m cases. But the action is heavily skewed not only between the ultra-premiums and the mixtos, which only have to be 51%  agave, but geographically as well. The US accounts for more than 70% of the global tequila export action, and there are just over 100 countries vying for the remaining percentage.

The US is also Irish whiskey’s main stamping ground and, although growing, it is much smaller than the Mexican spirit’s category. Bushmills almost managed 10% growth last year with a case tally of 230,000 in the US. While overseas it grew by 14% to around 800,000 cases, its performance was well behind category leader, the Pernod Ricard-owned Jameson. Its global sales were up by 14% to 4.6m, while in the US depletions were up by 16% to 1.9m cases.

Jameson’s performance clearly underlines the potential of the Irish whiskey category per se – and it has been the case of ‘mighty oaks from little acorns grow’. When Pernod Ricard acquired the brand back in 1988 via its acquisition of Irish Distillers, Jameson’s annual case tally was a mere 500,000 and Ireland was its primary market, with the US accounting for just 100,000 cases.

I just wonder at what stage of Jameson’s development Diageo would have sold it in order to plug a hole in its US portfolio. After all, it has taken 25 years for Pernod Ricard to make the brand what it is today and with the recent multi-million investment into more distilling and ageing facilities the Jameson story is very far from over. 

This is all a long-winded way of suggesting that Diageo is quite possibly guilty of short-term thinking and may live to regret the Bushmills sale. The stark fact is that tequila’s dynamism is almost entirely US-centric and, although the US is Irish whiskey’s top export market, it is by contrast far more of an international tipple, and herein quite possibly lies Bushmills attraction for the Beckmann family.

The corporation has stated it is the most significant brand acquisition in its long and illustrious history and that the intention is to continue its development ‘globally’ while at the same time pointing out that there are great similarities behind the two spirits, in terms of history etc etc.

Of late though, Tequila Cuervo, has had something of a rough ride in the US – depletions were down 4% to 3.3m cases last year, and the Beckmann-owned Proximo importer is having to work hard to revive the brand’s fortunes. So it would make sense to further develop in pastures new, and no doubt there are pastures where Cuervo can piggy back on Bushmills, and vice versa.

Since acquiring Bushmills from Pernod Ricard, Diageo has invested heavily in the brand – and I for one am sorry it will not reap the rewards. Mind you it might be a different story if I was a significant investor.