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.
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.
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.