The histories of the United States and Mexico have been inextricably entwined since the early days of both countries. In the 19th century there were land and border issues that were ultimately resolved with the transfer of large portions of land in what are now the states of Texas, Arizona, California and New Mexico. But regardless of where the border lay, the cultural influence of Mexico on California and the Southwest has been undeniable. The region’s largest and most charming cities, Los Angeles, San Francisco, San Diego, San Antonio and Santa Fe, to name a few, reflect that influence to this day. Mexican-inspired food has become one of the most popular cuisines in American restaurants and has become ubiquitous on the menus of America’s family-style chain restaurants. And the influence carries over into the beverage portion of the menu as well. According to polls of bar and restaurant owners, the Margarita has been the most popular cocktail in America for well over a decade.
Much like the way Mexican cuisine has evolved as chefs have experimented with the basic idea, so has the Margarita. Once strictly lime-flavored, there are now recipes that call for all kinds of fruit variations (mango, strawberry, tangerine, cranberry, et al.). Instead of generic triple sec, many trade-up Margaritas use Grand Marnier, Cointreau or another orange-flavored liqueur to further vary the taste profile. The one ingredient that hasn’t changed is the primary one — tequila.
The line of Jose Cuervo tequilas (Diageo) continues to dominate the category.
After dramatically outperforming the rest of the distilled spirits industry for more than a decade, tequila suffered a setback in 2000 and 2001 due to a shortage of agave. This in turn caused a dramatic increase in production costs resulting in higher prices. Unable to secure a supply of product at a bargain price, a number of lower-end brands dropped out of the market as a result. The tequila supply situation seems to have stabilized, and the category appears to be back on the growth track.
But even with the temporary setbacks the category has experienced, the growth pattern over the last few years has been impressive. According to Adams Handbook Advance 2004, last year total tequila consumption was up 6.4% nationally. On a relative growth basis, no spirit category can rival the performance of tequila over the past 15 years. Total consumption, which was only 4.4 million 9-liter cases in 1990, had risen to 5.9 million cases in 1997 and reached its highest point ever with more than 7.6 million cases in 2003.
“Tequila over the past year has made a tremendous comeback,” said Jose Chacon, senior brand manager for Allied Domecq’s Sauza family of tequilas. “We’re seeing growth across the board,” he said. “That’s been one of the positive things about our business. We have a pretty well-balanced portfolio with offerings in premium, superpremium and ultrapremium and while the bulk of our business is still in premium, we’re seeing tremendous growth across the board on all our items. The Sauza brand has grown primarily by one key factor. We have a very strong brand proposition for consumers. Some players chose to play with the quality of the product, we chose to limit the global expansion of the brand. Quality is still paramount.
Sauza (Allied Domecq), which upped sales by 100,000 cases nationally last year, is featuring this co-pack in the spring.
“The other piece that’s helping us and differentiates us from other players out there,” he continued, “is that since we have a full family of tequilas. We have a lot of ways to bring people into the franchise. Consumers want to explore and they want to experiment, but they want to do it under a safer environment. So exploration within one brand has been very strong over the last few years.
“Third we are supporting the business tremendously. We say, ‘We are a tequila and we’re proud to be a tequila.’ We launched a global campaign last year under the umbrella ‘Get Lost.’ We’re doing a lot of things on-premise and off-premise and it’s really working. The numbers that we’re seeing on the business support that.”
According to numbers compiled by Adams Beverage Group researchers, the Sauza brand family remained second in the category by a wide margin and picked up 100,000 cases in volume nationally (+9.9%) to finish the year at the 1.1 million case mark.
Leading Brands of Tequila in the Control States
(mixed cases)
Twelve Months Ending November
Brand
Supplier
2002
2003
% Change
Jose Cuervo
Diageo
561,162
587,408
4.7%
Sauza
Allied Domecq Spirits, USA
95,098
114,551
20.5%
Montezuma
Barton Brands
100,695
103,007
2.3%
1800
Skyy Spirits USA
63,844
68,079
6.6%
Pancho Villa
McCormick Distillers
35,154
37,441
6.5%
El Toro
Barton Brands
36,457
36,963
1.4%
Monarch
Monarch Importers
36,409
34,221
-6.0%
Aristocrat
Heaven Hill Distilleries
31,161
33,610
7.9%
La Prima
Great Lakes Liquor
24,014
25,497
6.2%
Pepe Lopez
Brown-Forman Beverages
23,904
23,846 -0.2%
Total Leading Brands
1,007,898
1,064,623
5.6%
Others
201,783
226,030
12.0%
Total Tequila in the Control States
1,209,681
1,290,653
6.7%
Source: Adams Beverage Group Database from NABCA data.
While Sauza and a number of other brands have shown strong and consistent growth, the category leader remains Diego’s powerhouse Jose Cuervo brand. In 2003 Cuervo, which was virtually unaffected by the category’s problems in 2001 and 2002, had its eighth consecutive year of increased volume. With sales of more than 3.2 million cases nationally (+1.9%) Cuervo accounts for around 43% of the category’s overall volume.
Of the top ten tequila brands only two Montezuma (#3) and Rio Grande (#10) failed to show growth last year. Both however had experienced huge volume increases in 2002 and their respective 1.5% and 4.3% declines still put them far ahead of their consumption figures for 2001.
For the rest of the category, growth nationally in 2003 ranged from modest for Juarez (+1.3%) to impressive for 1800 Reposado (+7.3%) to phenomenal for Patron (+51.9%), Margaritaville (+22.6%) and Cazadores (+41.7%).
Two Fingers Tequila (Heaven Hill Distilleries) recently debuted new labels.
In the control states, tequila sales fared equally well. Total tequila sales grew 6.7%, with Jose Cuervo posting a 4.7% gain. Sauza (Allied Domecq) exploded for a 20.5% increase, while Montezuma (Barton Brands) was up 2.3% and 1800 (Skyy Spirits) gained 6.6%.
Cinco Gold
Like most brands in the category Jose Cuervo has traditionally tied its Mexican heritage to the Cinco de Mayo holiday, one of Mexico’s officially celebrated independence days. This year’s effort is an integrated promotion under the banner, “Grab For The Gold,” scheduled to kick off in April and to run through June. Brand marketers are using a mix of web, print and radio advertising and displays in off-premise outlets. Consumers who purchase special bottles of Jose Cuervo Especial during the “Cuervo de Mayo” holiday timeframe will receive $5 off CuervoNation merchandise, including items such as flags, volleyballs, coolers, shot glasses, foldable chairs, visors, poker sets, T-shirts, available exclusively on CuervoNation.com. In states were monetary incentives to consumers are not allowed, alternate neckers and shelf pads will simply direct consumer to the website.
Stand Out From The Crowd
As the tequila category has grown the competition among suppliers within the category has grown even more intense. As more and more brands crowd each other for space on retailers shelves packaging takes on even more importance than usual. An attempt to “enhance shelf presence” was among the reasons given for the recent package redesign of Two Fingers Tequila. While keeping the brand’s familiar opaque black bottle the new design uses different colored foils to identify the silver and gold tequilas and adds a number of Mexican motifs around the traditional brand logotype. “As a long time category leader with much equity built up in the name, logo and bottle, we believe the label upgrade will help keep Two Fingers Tequila visible and in demand among today’s consumers,” noted Susan Wahl marketing manager for brand importer Heaven Hill Distilleries. A number of point-of-sale materials are available to support the redesign including case cards, floor bins and shelf talkers all of which show the new packaging and carry the tagline, “Do It With Two Fingers.” The relaunch, which should be on retail shelves by April, is also being supported with Margarita salt or shot glass on packs, where legal.
