It seems that Cuervo is fairly heavily geared towards tequila. Is that a risk in itself, e.g. consumer tastes moving away from Tequila towards wodka, gin, rum... ? Over the last few years its seems like Tequila became more popoular, but that does not always need to be the case?
Also, I found the point on lower agave pricing interesting - how do you track these and do you think input costs will be low for some time to come or move back up?
Definitely a risk. Tequila represents about 80% of spirits sales - excluding RTD and non alcool sales. But at the same time it represents a strength since there is so much potential in RoW and even in Mexico. I will add the Tequila slides from the investor package. Tequila has grown at a 6-7% CAGR in the world. So it is a risk and and a opportunity. Pernod Ricard is more diversified with its mix of Irish Whiskey, Scotch, Gin, Rhum Cognac etc.. but expect lower growth. Statistically, I would say that Cuervo has a higher expected growth with a higher standard deviation.
Fair point the customer preferences. Have read that Tequila consumption is increasing in Europe and in Asia where Cuervo has a market share of 30% resp. 60% acc to Annual Report. Be positive that this will continue.
Becle writes about the vertical integration value chain incl. agave cultivation. I guess this is a minor part of the needed agaves but no info.
Fascinating deep dive on a name that's completely off the radar for most investors. The timing is particularly compelling—buying a dominant market leader at 10.5x EV/EBIT while gross margins are expanding from falling agave prices is textbook contrarian value. I appreciate how you've documented the inflection across both the super-premium tequila segment and the broader spirits portfolio. The 86% management ownership is a double-edged sword: it creates alignment but also explains the discount due to limited float. What really stands out is the defensive positioning—EBITDA/Debt of 1x means they can weather cyclical headwinds and potentially consolidate when competitors struggle. The Mexico demographic tailwind combined with 55%+ domestic market share provides a durable earnings floor. The tequila concentration risk that Carsten mentioned is valid, but as you noted in your response, tequila has been the fastest-growing spirit catgory globally. At 19.5 pesos entry, the asymmetry seems quite favorable if margins continue to expand as guided. Thanks for sharing this gem.
Buying a few more shares before that close today! I got the value shake before buying my first shares. This is normally a good sign... Last time was Bombardier at 78CAD. Great article on Antropic Amazon, you know your stuff. I am always in awe of the black magic Dev ops engineer are able to do! Was a 4G / 5G wireless engineer / inventor and a great Dev Op is pure Gold...
Great work as so often. Thanks for the write-up.
It seems that Cuervo is fairly heavily geared towards tequila. Is that a risk in itself, e.g. consumer tastes moving away from Tequila towards wodka, gin, rum... ? Over the last few years its seems like Tequila became more popoular, but that does not always need to be the case?
Also, I found the point on lower agave pricing interesting - how do you track these and do you think input costs will be low for some time to come or move back up?
Definitely a risk. Tequila represents about 80% of spirits sales - excluding RTD and non alcool sales. But at the same time it represents a strength since there is so much potential in RoW and even in Mexico. I will add the Tequila slides from the investor package. Tequila has grown at a 6-7% CAGR in the world. So it is a risk and and a opportunity. Pernod Ricard is more diversified with its mix of Irish Whiskey, Scotch, Gin, Rhum Cognac etc.. but expect lower growth. Statistically, I would say that Cuervo has a higher expected growth with a higher standard deviation.
Fair point the customer preferences. Have read that Tequila consumption is increasing in Europe and in Asia where Cuervo has a market share of 30% resp. 60% acc to Annual Report. Be positive that this will continue.
Becle writes about the vertical integration value chain incl. agave cultivation. I guess this is a minor part of the needed agaves but no info.
Great write-up a always. Interestingly, here in Germany, you can't buy top tequila in most stores. Just the cheap and bad stuff.
The shelfs in Canada are full ! I ll ship you a bottle of 1800 soon! Check Exhibit H! Tequila Sunrise and Margaritas Incoming
Fascinating deep dive on a name that's completely off the radar for most investors. The timing is particularly compelling—buying a dominant market leader at 10.5x EV/EBIT while gross margins are expanding from falling agave prices is textbook contrarian value. I appreciate how you've documented the inflection across both the super-premium tequila segment and the broader spirits portfolio. The 86% management ownership is a double-edged sword: it creates alignment but also explains the discount due to limited float. What really stands out is the defensive positioning—EBITDA/Debt of 1x means they can weather cyclical headwinds and potentially consolidate when competitors struggle. The Mexico demographic tailwind combined with 55%+ domestic market share provides a durable earnings floor. The tequila concentration risk that Carsten mentioned is valid, but as you noted in your response, tequila has been the fastest-growing spirit catgory globally. At 19.5 pesos entry, the asymmetry seems quite favorable if margins continue to expand as guided. Thanks for sharing this gem.
Buying a few more shares before that close today! I got the value shake before buying my first shares. This is normally a good sign... Last time was Bombardier at 78CAD. Great article on Antropic Amazon, you know your stuff. I am always in awe of the black magic Dev ops engineer are able to do! Was a 4G / 5G wireless engineer / inventor and a great Dev Op is pure Gold...