Diageo to expand tequila production capacity with US$500m investment in new facilities in Mexico

MEXICO – British multinational brewing company Diageo is investing about US$500 million in expanding its tequila production in Mexico amid surging demand for the Mexican alcoholic drink. 

According to a statement from the company, the funds will be used in building new facilities in the State of Jalisco where Tequila is widely believed to have originated.  

The name Tequila is actually a regional-specific name for a distilled beverage made from the blue agave plant, primarily in the area surrounding the city of Tequila which is located in Jalisco.   

Construction of the new facilities is due to begin later this year, and the expanded production capacity is expected to lead to the creation of 1,000 jobs.  

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Enhanced investment in Tequila makes sense for Diageo as the category has been delivering one of the highest levels of growth for the company.  

Diageo’s tequila portfolio is currently comprised of million-case Tequila brands Don Julio, which it acquired in 2015 from the producer of Jose Cuervo and Casamigos which was sold to the drink’s giant in 2017 in a deal worth up to US$1 billion.   

In fiscal 2021, Diageo’s tequila organic net sales grew 79% and the category now accounts for 8% of the company’s organic net sales.  

Growth is being primarily driven by North America where Tequila is benefitting from its broad appeal across consumer occasions.   

According to market research firm imarc, a significant rise in the popularity of cocktail culture both in and out of the house represents one of the key factors impelling the global tequila market growth. 

Moreover, due to changing lifestyles and inflating income levels, ultra-premium and exclusive handcrafted tequila variants are gaining traction around the world. 

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The drink’s popularity is projected to drive category growth at a CAGR of 14.4% during 2021-2026 to reach US$ 25.4 Billion by 2026, according to imarc. 

A bold investment by Diageo is a testament to the category’s potential amid changing consumer tastes and preferences.  

 Álvaro Cárdenas, President, Latin America, and Caribbean, Diageo, said: “This exciting investment in Mexico will support our future category growth to meet Mexican and international demand. It will also allow us to continue surprising and delighting consumers with our amazing tequila portfolio.” 

 The new facilities will also support Diageo’s 10-year sustainability action plan, ‘Society 2030: Spirit of Progress’ by including environmentally friendly technologies.  

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