BROWN-FORMAN DROPS A WHOPPING $875 MILLION
Brown-Forman beat out other large players in the spirits category vying to purchase the Tequila Herradura business, which produces two of Mexico’s leading tequila brands. The $875 million acquisition puts B-F in a position to profit off the tequila craze after already gaining huge success with Jack Daniels whiskey and Southern Comfort. Last year tequila posted the highest growth out of the spirits category jumping 8.6% as compared to the runner up, rum, which rose 6.8%, according to ACNielsen.
Formerly owned by the Roma family of Guadalajara, Mexico, Brown-Forman will assume the super-premium Herradura and premium el Jimador tequila brands along with their assets and operations. Herradura’s New Mix tequila-based ready-to-drink brand will also be included.
IS HERRADURA WORTH IT? It seems like a lot to pay for a brand that is little known in the U.S., so why would B-F bother? For one, it allows the company to take on a new brand without having to build it from scratch, which can be a considerably risky move. Many large beverage companies take on niche brands to keep themselves from looking too big or too mainstream, while at the same time pushing sales with extended distribution networks and marketing. Altogether, B-F paid close to $49 per case of Herradura and el Jimador combined which produces approximately 380,000 and 1.4 million cases a year respectively. It seems like a lot but hey, that’s the price of premiums today and perhaps B-F will make up for it in sales. Also, the margins on high-end tequila are quite large, up to 70% and 80%.
True, B-F already has a tequila brand, Don Eduardo, in its portfolio but the brand significantly lags behind its rivals. Diageo’s Jose Cuervo has the most market share in the U.S. followed by Fortune Brands’ Sauza tequila and Montezuma from Constellation Brands. Herradura is already a pretty popular tequila here in Texas, and will likely soon make some inroads nationally with increased distribution.
CEO Paul Varga pointed out that the “cocktail craze” is currently driving spirits consumption in the U.S. with margaritas leading the category. Taking on tequila brands might also" help us advance our business within the growing Hispanic population of the U.S.," he said in a statement.
The company will issue their 1st-quarter conference call on Thursday, August 31 and will hopefully address its latest acquisition more closely.
Formerly owned by the Roma family of Guadalajara, Mexico, Brown-Forman will assume the super-premium Herradura and premium el Jimador tequila brands along with their assets and operations. Herradura’s New Mix tequila-based ready-to-drink brand will also be included.
IS HERRADURA WORTH IT? It seems like a lot to pay for a brand that is little known in the U.S., so why would B-F bother? For one, it allows the company to take on a new brand without having to build it from scratch, which can be a considerably risky move. Many large beverage companies take on niche brands to keep themselves from looking too big or too mainstream, while at the same time pushing sales with extended distribution networks and marketing. Altogether, B-F paid close to $49 per case of Herradura and el Jimador combined which produces approximately 380,000 and 1.4 million cases a year respectively. It seems like a lot but hey, that’s the price of premiums today and perhaps B-F will make up for it in sales. Also, the margins on high-end tequila are quite large, up to 70% and 80%.
True, B-F already has a tequila brand, Don Eduardo, in its portfolio but the brand significantly lags behind its rivals. Diageo’s Jose Cuervo has the most market share in the U.S. followed by Fortune Brands’ Sauza tequila and Montezuma from Constellation Brands. Herradura is already a pretty popular tequila here in Texas, and will likely soon make some inroads nationally with increased distribution.
CEO Paul Varga pointed out that the “cocktail craze” is currently driving spirits consumption in the U.S. with margaritas leading the category. Taking on tequila brands might also" help us advance our business within the growing Hispanic population of the U.S.," he said in a statement.
The company will issue their 1st-quarter conference call on Thursday, August 31 and will hopefully address its latest acquisition more closely.
posted at 1:04 PM
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