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Clooney's $1 Billion Tequila Windfall Shows Power Of Celebrity

Published on Jun 23 2017 9:26 AM in Drinks tagged: Trending Posts / Diageo / Tequila / George Clooney / Celebrity

Clooney's $1 Billion Tequila Windfall Shows Power Of Celebrity

From the George Foreman grill to George Clooney’s tequila, celebrity sells.

Rarely has a sale been as lucrative as the $1 billion the actor and two partners could fetch for Casamigos, the tequila brand they founded only four years ago. What started more as a hobby among a few guys hanging out in Mexico morphed into a must-have brand, fueled by Clooney’s star power and the lure of casual-luxury life depicted on the Casamigos Instagram feed.

Financial analysts frowned, saying the numbers don’t add up for the buyer, London-based distiller Diageo Plc. To some marketers, however, the deal made more sense.

At a time when consumer-product giants ranging from Diageo to Unilever to Nestle SA are struggling to connect with their customers, Casamigos gives the drinks giant something it can’t develop easily in-house: a brand with a story to tell, carefully tended in social media, that uses the actor’s recognition to cut through the clutter of competing drink labels.

“Because you’re selling something that’s hard to differentiate from other brands, you have to create a world around it,” said Richard Pinder, chief executive officer for the international business of ad agency Crispin Porter + Bogusky. “The promotional cost around this brand will be much lower. That increases the value.”

Shares Fall

Diageo shares fell Thursday as investors struggled to make sense of a deal in which the company will pay an initial $700 million, which could be topped up with $300 million more, for a brand that’s on track to sell a mere 170,000 cases of tequila this year. The company countered that the rapid growth of Casamigos transcended the price tag.

Consumer-product giants find it increasingly difficult to develop the enthusiastic following that Clooney commands after his starring role in films ranging from “Ocean’s Eleven” to “Hail, Caesar.” The actor and his partners -- developer Mike Meldman and entertainment entrepreneur Rande Gerber -- have harnessed that popularity to develop Casamigos via social media.

Casamigos has 83,000 followers on Instagram, more than 120,000 likes on Facebook and a Twitter feed that sends out photos of Clooney and Gerber riding down dreamy country lanes on vintage motorcycles. While Clooney and his partners don’t make the tequila, images of the actor casually chatting with Mexican agave workers link him into its provenance. The partners created Casamigos in 2013 after tasting tequilas together at vacation homes in Cabo San Lucas, Mexico, according to Gerber, who has his own brush with celebrity thanks to his supermodel wife, Cindy Crawford.

The acquisition helps Diageo tap growing demand for small brands that are flourishing as drinkers seek out alternatives to the dominant labels on supermarkets shelves. Jeremy Cunnington, senior alcoholic drinks analyst at Euromonitor International, said the high multiples that drinks companies have been paying in some recent acquisitions of niche spirits could lead to cases of buyers’ regret.

‘Seller’s Market’

“It is very much a seller’s market and a number of buyers will be burned with their optimism for the brands’ performance not matching reality,” he said.

Casamigos is not the first celebrity-founded company to get sold for an eye-popping sum. In 2014, Apple Inc. acquired Beats Electronics, a headphone maker created by rapper Dr. Dre and music industry executive Jimmy Iovine eight years earlier. Actress Jessica Alba’s Honest Co., a household products maker, drew interest from giant Unilever last year, according to a person familiar with the matter.

Other celebrity brands that have achieved success include Newman’s Own sauces, founded in 1982 by actor Paul Newman and a partner. Boxer Foreman has helped to sell millions of household grills named after him and made by Spectrum Brands Holdings Inc. Donald Trump applied his name to everything from steaks to hotels and has ridden his personal brand all the way to the White House.

Crawford was one of the first supermodels to build a brand beyond the fashion catwalk and swimsuit spreads that gave her fame, launching branded workout videos, furniture and cafes.

Diageo has a long history of associating itself with celebrities, though its purchase of Casamigos deepens that involvement. Soccer player David Beckham is the face of its Haig Club single-grain Scotch whisky. Sean “Diddy” Combs has partnered with Diageo on marketing DeLeon tequila and Ciroc vodka, while the latter’s mango variant is promoted by DJ Khaled.

Celebrities’ Limits

“Diageo have a recent and pretty decent track record of using celebrities and not gratuitously,” Neil Hughston, CEO of advertising agency Duke. “Like anything that’s going to resonate globally, borrowing celebrity interest works.”

But there are limits to how much of a boost even a celebrity as popular as Clooney can provide, said Jez Frampton, CEO of Interbrand Group, a branding consultancy.

“The authenticity of tequila obviously comes from Mexico,” Frampton said. “So I’m not sure how many people will buy it because of George Clooney. You’d probably want to make sure it’s a good tequila first.”

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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