Yesterday, beverage giant Diageo announced they were buying the Casamigos tequila brand for $1 billion: $700 million up front, and the rest in performance incentives. Casamigos was founded four years ago by George Clooney and his friend Rande Gerber, husband of supermodel Cindy Crawford.
There have been large spirits deals before, most notably when Grey Goose was sold to Bacardi for a reported $2.2 billion---but that was back in 2004, when a couple of billion dollars was still considered to be a lot of money. Remember, though, that Grey Goose was a best-selling vodka at the pinnacle of the vodka craze. In the current environment, it’s easy to imagine a billion-dollar deal for a bourbon brand, but tequila is another category entirely.
Here’s the interesting part of this situation: the buddies insist that Casamigos was initially made just for themselves, as a house tequila. They were both building homes in a Los Cabos resort complex and were dissatisfied with the quality of the tequila they were drinking, so Clooney suggested they make their own for private consumption. The two partnered with Mike Meldman, developer of the Los Cabos complex. “We created it to drink with our friends,” says Gerber. “It wasn’t intended for the public, but once the word got out, we couldn’t resist sharing it with everyone.”
As PR spin and image creation go, that line is pretty good (“Aw shucks, we were just fooling around in the treehouse and had no idea it would catch on.”). But the validity of that message is blurred by the fact that Clooney and Gerber hired Lee Einsidler as the CEO of Casamigos---the very same guy who launched Grey Goose and took it to $2.2 billion seven years later. The tequila may well have been tailored to their personal taste, but they had larger ambitions.
I haven’t tried Casamigos, nor have I been offered samples (although they can well afford to, after yesterday). It fits firmly into the super-premium niche, with the three expressions---Blanco, Reposado and Anejo---selling for $45, $50 and $55 respectively. According to industry sources, the Reposado and Anejo account for half the company’s sales. Since Blanco is used in most drink recipes and is the powerhouse for many tequila brands, the sales mix would seem to indicate that Casamigos is successfully appealing to a connoisseur market. Very shortly, I would expect to see them issue a tequila with special selection or extended barrel aging for $125-150.
To what extent was the popularity of Casamigos influenced by the profile of the principles? There are many celebrity-sponsored wine and spirits brands on the market, but few have had this kind of success. Of course, a number of them were established by rappers (P. Diddy, Ludacris, PitBull, Jay Z, etc.). Xzibit’s ultra-premium tequila, Bonita Platinum, is chill-filtered three times and sells for $105, but no one has yet offered him a billion for it. You may or may not be sweet on George Clooney, but he’s a hard guy to dislike. You could say that the parameters of the deal might have been different if the partners were George Schwartz and Ralph Gerber, but for the moment Clooney’s twins definitely have a new pair of shoes.