Race to Acquire Luxury Brands Heats up Tequila M&A

“High-end Tequila is one of the fastest-growing categories within U.S. spirits,” says a research analyst.
Photo by Kevin Winter / Getty

With the rising consumer demand for Mexico’s best-known agave-based spirit and a race for “super-premium” labels there has been an increase in mergers and acquisitions (M&A) in the Tequila sector. Recent news that Bacardi will buy the maker of Patrón Tequila in a $5.1 billion deal cemented the M&A trend in the Tequila space.

Earlier this month, Pernod Ricard purchased the remaining 16% of Avión Tequila that it didn’t yet own for an undisclosed price but it’s estimated by some experts that it was around $100 million. In June, Casamigos Tequila, which was co-founded by actor George Clooney, was bought by Diageo for up to $1 billion.

“High-end Tequila is one of the fastest-growing categories within U.S. spirits,” notes Edward Mundy, an equity research analyst for Jefferies. Super-premium Tequila is growing at about 10% and ultra-premium more than 30%, compared to about 4% growth in U.S. spirits over the past three years, he says. “Recognition that Tequila can provide faster growth at a higher price point is driving M&A in Tequila,” Mundy says.

“There are also opportunities for multi-nationals to widen distribution of high-end Tequila outside of the U.S. market,” Mundy says. For example, amid concerns about NAFTA, a number of Tequila producers have renewed focus on consumers in Europe.

All three of the acquiring conglomerates already have a Tequila as part of their portfolio. The M&A emphasis has been on brands with luxury bottlings in their portfolios–many of which are sold in limited quantities and at high price points–a trend akin to Scotch whisky. For example, while Patron Silver retails for around $40 for a 750-ml bottle, Gran Patrón Piedra, the brand’s three-year-old extra- añejo offering, debuted at around $400 when it was introduced in 2016. And in October, Patron released a limited-edition seven-year-old Tequila packaged in a bottle made by French glassmaker Lalique, priced at $7,500 a bottle.

What could this mean for the industry going forward?

“Renewed interest in high end Tequila is good news for the Tequila industry,” Mundy says. “However, agave pricing could come under pressure given increased demand.” In the long term, this could squeeze profits for producers, or translate into steeper prices for Tequila overall.

Published on January 24, 2018
Topics: Latest News
About the Author
Kara Newman 
Spirits Editor

Kara Newman reviews spirits and writes about spirits and cocktail trends for Wine Enthusiast. She's the author of Shake.Stir.Sip.: 40 Effortless Cocktails Made In Equal Parts (Chronicle Books, 2016) as well as ROAD SODA: Recipes and techniques for making great cocktails, anywhere (Dovetail Press, 2017). Email: spirits@wineenthusiast.net

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