As the economy has slowed over the past 18 months, so have sales of just about every spirits category, and tequila is no exception. Still, the overall category increased sales last year, though at a slower pace than in recent years, and suppliers have continued to energize the marketplace with new brands and expressions.
For years, tequila has been known for two things in the U.S: as a drink done as shots, and as the primary spirit in one of the most popular cocktails of all time, the Margarita. But as drinking preferences have grown more sophisticated, suppliers have been importing a widening portfolio of aged and handcrafted tequilas for more than a decade now.
“Tequila is coming of age with interesting variations, and consumers are appreciating that,” said Jose Cuervo brand manager Doug Campbell. “They’re coming around to tequila as a spirit equal to other, more established spirits.”
As a category, tequila sales grew 1.3% overall to reach 11.2 million 9-liter cases in 2009, according to preliminary numbers from the Handbook Advance 2010, published by The Beverage Information Group. Tequila growth was a lower but still healthy 0.6% in control states, according to NABCA data, on a volume of nearly 2.1 million 9-liter cases.
Jose Cuervo, far and away the leading tequila brand in control states, accounting for 36.2% of control state tequila sales according to NABCA data (32.4% nationally), offers a portfolio that includes Gold Especial, Silver Especial, Black Medallion añejo, Tradicional Reposado, Platino and Reserva de la Familia. Silver was added to the line in February 2009.
Though its lineup dominates the category, Cuervo sales hit a snag last year, down 3.6% nationally (5.6% in the control states). Indeed, more than half of the top 10 best-selling tequilas in control states declined last year, including the second most popular, Sauza, which shrank 3.2% nationally (down 2.9% in the control states).
Some of the leading brands did do well last year, though, including Proximo’s 1800 brand tequila line, which grew 3.3% nationally (up an impressive 12.0% in the control states), the value-priced Juarez, up 18.8 % (jumping 29.3% in the control states), Patrón’s tequila lineup, up 0.3% nationally (0.8% in the control states), and El Jimador’s portfolio, which gained an impressive 26.0% nationally..
“We’re on a roll with 1800 Silver,” said Elwyn Gladstone, vice president of marketing for Proximo Spirits, which offers 1800. “Silver has the real growth.” Other labels in the line include Reposado, Añejo and Colección, an extra añejo tequila released annually in limited quantities. There’s also Silver Select, released 18 months ago as the first 100-proof tequila. The brand is being supported with national and online advertising featuring The Sopranos star Michael Imperiloi, said Gladstone, and this September 1800 launches a $15 million ad campaign that will debut on cable channels including ESPN and Comedy Central.
Even where down, brand managers are bullish about the segment.
“The consumer is back into home entertaining and wants quality ingredients to make better cocktails at home,” said Pryce Greenow, Beam Global’s general manager of mixables, “so we see a return to growth with Sauza this year.” He said Suaza will be pushing at-home entertaining in 2010 with a marketing program that will have both print and digital advertising and some in-store programs for retailers.
“Tequila has always been a high value for Beam,” said Greenow, “and we have tequilas across the board. We use the wine analogy, having sets of brands.”
The Beam brands, which include Tres Generaciones, El Tesoro, 100 Años and Hornitos, all have sets that include a blanco (sometimes referred to as “platinum” or “plata”), a reposado and an añejo.
A Little Experimentation
Much of the growth and excitement in the tequila category has come from tequilas outside the top 10, with consumers exploring a wider range that includes the likes of the many 100% blue agave tequilas such as Herradura and Cabo Wabo.
A culture of experimentation and indulging in affordable luxury has helped fuel the interest, as has competitive prices on tequilas made from 100% blue agave; consumers often will opt for 100% blue agave expressions over mixtos when the difference in price is small. Good tequila, consumers are finding, generally can be less expensive than, say, a good cognac.
One tequila that is benefiting is Heaven Hill’s Lunazul, a 100% blue agave tequila available in a blanco and a reposado that has been in the U.S. for less than two years. “We sold 20,000 cases in 2008,” said Larry Kass of Heaven Hill, “and 42,000 cases last year, mostly at retail. For in-store marketing we have POS materials and case cards and the Heat up the Night campaign.”
Heaven Hill also offers Two Fingers and La Certeza tequilas, and Kass says that Two Fingers has had a “rebirth” since it was repackaged last summer. “Sales went up remarkably after this,” Kass noted, “and we have more retail activities planned.”
La Certeza, another 100% blue agave tequila, which launched in 2008, is a joint venture between Heaven Hill and the Beckmann Gonzalez family at the Tierra de Agaves Distillery. It’s available as Blanco, Reposado and Añejo.
Working The High End
“We’re most excited about Hornitos,” stated Beam’s Greenow, also noting the importance of 100% blue agave. “It was one of the first 100% blue agave tequilas introduced into the U.S, in 1960, and has a big tradition in the West. We’ve increased our investments in Hornitos, and this year for the first time we’ll be running TV ads, beginning in the second quarter. We’re committed to Hornitos, and we’ll maintain our investment in the brand.”
Another high-end tequila that is doing well for Beam is El Tesoro. “El Tesoro has been an amazing brand for us with awards,” Greenow said, “and the message here is the hand-made, traditional methods of production.”
Three Proximo tequilas in the high-end, 100% blue agave space include Gran Centenario, Tenampa Azul and Maestro Dobel Diamond, billed as the world’s first crystal-clear aged tequila, a blend of extra añejo, añejo and reposado tequilas in hand-filled, -labeled and -numbered bottles.
Scott Schiller, brand manager for Tenampa Azul and Gran Centenario, said Gran Centenario plays more to the on-premise market, while Tenampa Azul is geared toward retail. Tenampa Azul, launched in late 2008, is offered as a silver and a reposado. “We have plans for a lot of marketing efforts and a big focus on Tenampa Azul,” he said.
Gran Centenario, also 100% blue agave and in the U.S. since the late 1980s, is packaged in an art deco bottle. It comes as Plata, Reposado, Rosangel (reposado added to port barrels and infused with hibiscus flowers), Añejo and Leyandra (containing 40-year-old tequila and priced at $350).
For its part, Skyy Spirits markets the Cabo Wabo superpremium lineup, which last year debuted a new package for its three upscale tequilas.
The Milagro tequila portfolio features Silver, Reposado and Añejo. In Milagro’s superpremium Select Barrel Reserve line there are the same three label names. “We’re focusing on the six main brands,” said Liz Edwards, Milagro brand manager at William Grant & Sons. “We discontinued the flavors Limón and Mandarino last September. We have a new concentration on brand awareness and a new look and feel for the brands.”
Sampling programs are part of the marketing campaign, along with a Milagro-branded agave nectar available in a 375 ml bottle packaged with a 750 ml bottle of Silver.
Other offerings finding favor with consumers include McCormick’s Tarantula Azul, available in Plata, Reposado, Azul and Strawberry. The company also features Tequila Rose, a cream liqueur with tequila offered in Strawberry, Java and Cocoa flavors.
One challenge for Tequila is expanding beyond its reputation as a spirit of shots and Margaritas. While those obviously are important parts of overall tequila sales, moving the spirit up-market and growing appreciation for the category requires extensive consumer education. This includes getting the word out about the importance of 100% blue agave, promoting tequila as a sipping drink, highlighting the nuances of the spirit and drawing comparisons with better understood categories, such as comparing a fine extra añejo with a quality whiskey.
One tequila maker taking up the challenge is Patrón, the second-best selling tequila in the U.S., which moved 190,052 9-liter cases last year in control states and 1.7 million cases nationally. Its line includes Silver, Reposado, Añejo, Burdeos, Gran Patrón Platinum, XO Café and Citronge.
“We have an education program that we executed in 2009 in New York, New Jersey, San Francisco, Los Angeles and Chicago,” said brand manager Jennifer Long. “We’ll look to expand the program to additional markets in 2010 in Florida, Georgia, Dallas and possibly other cities.”
A key member of this education program has been Patrón’s master distiller, who has visited the U.S. at least six times. Patrón has also trained 10 tequila ambassadors at the hacienda and distillery in Mexico.
Beginning last summer, Patrón brought out in-store displays and shelf displays for retailers to push the mixability message. Throughout the country this year there will be special events and public relations efforts for the brand, as well as print advertising.
Don Julio, Diageo’s other big tequila brand after Jose Cuervo, also is focusing on education, both building consumer understanding and playing up the brand’s artisanal roots.
“Our focus for 2010,” said Don Julio brand manager Alefiyah Sarma, “is on tequila education and taking the consumer on a tequila journey. We’ll have an advertising campaign on these themes for out-of-home buys and sampling on-premise,” in select major markets.
Sarma says that the message will be about getting back to the Don Julio story — the founder of the distillery — and that efforts will be made equally between on- and off-premise markets.
“We’re spending money in both,” noted Sarma, “driving our strengths, which we see as quality, heritage and authenticity.
Don Julio sells Blanco, Reposado, Añejo, 1942 and Real labels in the U.S. The 1942 Tequila sells for about $125 for 750 ml and has been redesigned to sport a brown, agave-leaf-shaped bottle. It isn’t the top of the line Don Julio superpremium tequila, however. That spot belongs to Real, priced at $350 a bottle.
From Mexico With Love
If American consumers still are discovering tequila, one segment of the population that needs a little less education is the growing number of immigrants from the spirit’s home south of the border. The influx of Mexican consumers is a boon for tequila sales, and some brands are embracing the connection wholeheartedly.
El Jimador, marketed by Brown-Forman, is one such brand; it recorded explosive growth of 26% nationally in 2009 on sales of 213,000 9-liter cases, partially by playing off its Mexican base.
“El Jimador is number one in Mexico and is sold to many Mexicans here,” said Mark Bacon, U.S. brand manager for Casa Herradura brands, which include El Jimador, Herradura, Antiguo, Don Eduardo and Pepe Lopez. He says marketing for El Jimador and Herradura in 2010 focuses on television and radio in both Spanish and English.
The brand also is leveraging new media. “We’ll be using the website, Facebook and a new iPhone application that launched in February,” said Bacon. “This app is a start-to-finish party planning tool and is a free download.”
El Jimador comes as Blanco, Reposado and Añejo. Herradura has the same three labels plus Seleción Suprema Extra Añejo.
Antiguo (Blanco, Reposado, Añejo), a superpremium brand, came to the U.S. last October in California, Kentucky, Arizona, Illinois and Nevada. It was first launched in Mexico in 1995 to commemorate Casa Herradura’s 125th anniversary.
100 Años is a 100% blue agave product introduced in the U.S. about four years ago by Beam that also is mining the Mexican consumer. It’s a 1 million-case brand in Mexico, said Beam’s Greenow, and “it is number two in brand awareness for Mexican-Americans.” 100 Años is a brand mostly sold at retail, and Beam will run a joint Mexican-American consumer campaign beginning in 2011.
“We’re driving 100 Años as fast as we can,” Greenow said, “offering a pack with two shot glasses, which will be collectibles and will change each year, and value-added items all year long.”
Cazadores, which offers a Blanco, Reposado and an Añejo, and grew by 2.7% nationally last year on sales of 300,000 9-liter cases, is another tequila playing off its roots. “The core Cazadores consumer is Mexican-American,” said Aaron Burns, a brand director for Bacardi, which markets the line.
Bacardi would like to expand the brand’s popularity beyond the Latin demographic, however. “The brand is well known in Mexico. We’re now focusing on new consumers, mostly at retail,” noted Burns.
Bacardi also offers a superpremium Tequila, Corzo. The bottle is a modern, design-oriented package with a pour spout that resembles a flat waterfall. The focus with Corzo mostly is on-premise in upscale bars and restaurants, but at retail there’s personalization of the bottle with an engraveable metal cuff on the label and a special pouring attachment that can also be engraved for customers.
The Margarita has helped put tequila on the map in the U.S. With new offerings, a push toward 100% blue agave and a general increase in and appreciation of tequila, however, that map is being expanded.
If 2009 was the year for staying home, the tequila makers were there with pre-mixed, ready-to-drink tequila cocktails.
Diageo has two lines to choose from, both in and 750 ml and 1.75-liter bottles. Authentic Jose Cuervo Margaritas come in the Classic Lime and Strawberry Lime flavors. New in 2010 will be Mango and Pomegranate. All four of these are made with Jose Cuervo Gold. Jose Cuervo Golden Margarita is made with Jose Cuervo Gold, Grand Marnier liqueur and lime.
Beam expanded its ready-to-drink Cocktail Cube portfolio in January with Sauza Tequila Strawberry Margarita, in 1.75-liter packages. It joins the Sauza Original Margarita Cocktail Cube nationwide. The lightweight packaging, with a pour spout, is said to keep the cocktails fresh for up to six weeks after opening. Each cube contains approximately 10 six-ounce cocktails.
El Jimador New Mix, a pre-mixed tequila cocktail, has sold over 5 million cases in Mexico since 1997 and entered California in December 2009. It’s now rolling out nationally in the U.S., sold in four-packs of 12-ounce cans. The three flavors are Paloma, Margarita and Spicy Mango Margarita.
1800 Ultimate Margarita, first released in 2005, is made with 100% blue agave tequila. New last year was 1800 Ultimate Pomegranate. These are packaged in 750 ml and 1.75-liter sizes, and the larger package includes a glass. There’s also a 1-liter tetra pack mix of 1800 Ultimate Margarita, Pomegranate and Mojito (all alcohol-free) to be released in the first half of 2010.
Luxco sells the pre-mixed tequila cocktail, Salvador’s Top Shelf Premium Margarita, in 750 ml and 1.75-liter bottles made with 100% blue agave tequila blended with orange liqueur and natural flavors.
ShotPack, part of the Beverage Pouch Group, is using juice-pack technology for ready-to-drink cocktails. In the tequila arena there are California Blue Buzz-a-Rita Original Margarita (California Blue Gold Tequila with caffeine, guarana and taurine) and California Blue Buzz-a-Rita Strawberry Margarita (with the same tequila and extra ingredients).
Others on the market include Bad Juanita’s Mexx Mixx, Chi-Chi’s Margarita (Original, Mango, Premium Gold, Strawberry), Lil Rita, Margaritaville Ready To Drink Classic Lime and Last Mango Margaritas, Mike’s Mike-arita, Rio Grande Margarita, Santoto Especial Rita Rita, Stinky Gringo Margarita, T.G.I. Friday’s Blenders and Lime Margaritas, Tarantula Strawberry and Azul RTDs and Tequiloco.
Gregg Glaser is editor and publisher of Modern Distillery Age, editor-in-chief for Yankee Brew News, news editor for All About Beer Magazine. He lives and writes from Connecticut.