Hollywood actor George Clooney and two business partners sold their 4-years old tequila company Casamigos for up to $1 billion to UK spirits company and Guinness maker Diageo. The two companies agreed to a deal, where the buyer will pay $700m now and a further $300m based on undisclosed performance measures over the next decade. Clooney and his two partners will continue to promote the product.
Diageo hopes to profit from the fast growing premium spirits market in the United States and wants to expand distribution of the brand beyond the US and Caribbean to Europe and other markets “to capitalise on the significant international potential of the brand”, according to Diageo’s chief executive, Ivan Menezes. Casamigos is the fastest-growing super premium tequila in the US and sold 120,000 9-litre cases last year at prices of $45-55 a bottle. This year the output is expected to reach more than 170,000 bottles.
The brand was invented by George Clooney and his two friends Rande Gerber, a nightlife impresario and husband of model Cindy Crawford and real estate mogul Mike Meldman. The trio own neighbouring homes in Los Cabos in Mexico and developed over 5 years the recipe with a master distiller in the Jalisco highlands of Mexico. Originally Casamigos, which is a synthesis of two Spanish words for house and friends, was “an idea to create the best tasting, smoothest tequila as our own house tequila to drink and share with friends” (Gerber). When the federal government informed them they were making too much for home consumption, each of the three partners invested $600,000 to make the hobby a business by contracting production out of Mexico.
“If you asked us four years ago if we had a $1bn company, I don’t think we would have said yes,” said Clooney. “This reflects Diageo’s belief in our company and our belief in Diageo. But we’re not going anywhere. We’ll still be very much a part of Casamigos.”
Casamigos competes within the Diageo portfolio with Don Julio tequila. In 2014, Diageo swapped its Bushmills Irish whiskey out of its drinks cabinet for the remaining 50% of Don Julio tequila from the Mexican company Casa Cuervo. Don Julio also competes in the premium spirits sector and comes in several premium varieties that sell for $53-177 a bottle.
Experts believe that Diageo might have paid too much. Diageo shares fell 1.75% to $119.62 after the deal became known. The sales price amounts to 20 times annual sales, which is rather high compared to the category average of 4 to 6 times sales.
Besides George Clooney also other celebrities like Justin Timberlake have launched upmarket tequila brands.