Spirits Market an Attractive Opportunity

Q: Diageo has been in Mexico for more than two decades. How is the company positioned for growth?
A: Mexico is among the 10 most important markets for the company. We have seven of our top 20 brands here and we have achieved the leading position in the industry thanks to our whiskey brands and variants and the acquisition of Don Julio in 2015. Our best-selling products are Johnnie Walker Red Label, Johnnie Walker Black Label, Buchanan’s 12 and Tequila Don Julio 70, but we have other popular brands such as Zacapa, Captain Morgan, Tanqueray, Black & White, Smirnoff, Ciroc, Ketel One and Baileys. We hold a leading market share in value of 30.7 percent in the on trade and 28.5 percent in the off trade. The spirits category in Mexico represents an attractive opportunity and Diageo is well-positioned to capture this potential.
Q: How has Diageo’s strategy to position the brand in the country evolved?
A: Diageo is building a reputation as one of the best performing, most trusted and respected consumer products companies in the world. Regarding our brand portfolio, we are prepared to be ahead of market trends. For example, whiskey has become an attractive product for Mexican consumers due to its good quality and internationality. The tequila market has also evolved and the consumer is now turning to premium products. In general, Mexico is becoming more formal, people have more purchasing power and seek quality; our brands offer this quality in different categories and products. We are building a portfolio that has breadth and depth across categories and price points, and the correct distribution to allow us to meet consumer demand for a range of products, from standard scotch to super-premium tequila.
Q: What role do acquisitions play in Diageo’s strategy?
A: At the global level, we are always looking for fast-integration acquisitions with growing brands. In 2015, Diageo acquired Tequila Don Julio and committed to increasing advertising and promotional spending on the brand to further build its global presence and also to expand bottling and water treatment facilities in Mexico, among other activities. This plan, together with the acquisition costs of Tequila Don Julio, will bring Diageo’s expected investment in Mexico to around US$400 million over five years. We also recently announced the acquisition of Casamigos, an ultra-premium tequila that has been very successful in the US. We are always looking for opportunities that strengthen our portfolio, either through acquisitions or by innovating with our brands to make sure we surprise consumers and remain ahead of trends.
Q: What is Diageo’s role to address the market for illicit alcohol in the country?
A: According to studies, illicit trade in spirits in Mexico is 36 percent. As president of the Spirits and Wine Industry Commission (CIVyL) in Mexico, we have led initiatives to address illicit trade and reduce it to OECD levels. Within this context, recently the federal tax revenue and consumer protection agencies and CIVyL, along with trade associations representing modern trade, wholesalers, restaurants and small businesses, signed a “Pact for Formality,” which is meant to address illegality and tax evasion in our industry.
Q: How does Diageo contribute to the promotion of responsible drinking?
A: Diageo also has a leading role regarding responsible drinking in the country. Its program Actuando Mejor (Model Cities) aims to improve the ways in which alcohol is sold and consumed in Mexico. The program has reached more than 118 million people through campaigns, training and law enforcement to reduce underage drinking, binge drinking and drinking and driving. Recently, Actuando Mejor has focused on reducing underage drinking by training people who sell alcohol and partnering with the Education Ministry of Queretaro to provide information to students about the dangers of underage drinking and how to make healthy lifestyle choices. Police officers in 113 cities have received training through the program to help prevent alcohol-related car accidents.

Diageo is a British alcoholic beverages company. Diageo’s brands include Johnnie Walker, Buchanan’s, Baileys, Tanqueray, Smirnoff and Guinness. In 2015, the company bought tequila maker Don Julio and established a bottling plant for exports.