Anheuser to Distribute Buffett Tequila

In its latest move to test the liquor market, beer giant Anheuser-Busch Co. said it reached an agreement with singer Jimmy Buffett's Margaritaville Spirits Co. to distribute Margaritaville Tequila in Massachusetts.

The St. Louis Brewer has recently test marketed several spirits products amid slow growth in its core business. Margaritaville Tequila "is an exciting and growing brand, and an opportunity for our Massachusetts wholesalers to reach a new audience of adult consumers," said Dave Peacock, Anheuser's vice president of business operations, in a statement. "While our core brands remain our primary focus, we recognize that our industry is defined by change and look at all sources of industry volume for potential growth opportunities."

Terms weren't disclosed. The deal expands Anheuser's partnership with Mr. Buffett. Earlier this year, Anheuser teamed with the musician to develop LandShark Lager -- dubbed an "original island lager" -- through an Anheuser unit, Margaritaville Brewing Co.

Anheuser Chief Executive Officer August Busch IV has said the company would look into all areas of the alcohol industry for ways to drive growth. Earlier this year, Anheuser applied for a federal trademark for the word "Pomacai," which it described as a vodka, although the company hasn't said whether it will move forward with a vodka drink.

In 2005, the brewer created a unit called Long Tail Libations Inc. to develop and market distilled spirits. It has test-marketed a liqueur, Jekyll & Hyde, in more than 50 U.S. markets. It also began distributing Ku Soju -- a vodka-like product distilled from sweet potatoes by a South Korean company – in seven test markets last year.

Anheuser and other major brewers, such as Molson Coors Brewing Co., face growing competition from the wine and spirits industries, which have wrested about five points of U.S. markets share from the beer industry since 1995.

Source: The Wall Street Journal, David Kesmodel