As Tequila-based cocktails surge in popularity, the segment is quickly shedding its downmarket image and growing fast outside of its Mexico and US mainstays. Joe Bates reports.
Tequila is fast gaining ground in international markets as consumers enthuse about premium agave-based spirits in the same way they have in the US for years. With the on-premise channel recovering after COVID-19 restrictions, sales are rising (albeit from low bases in some markets), while brands are signing new distribution deals and launching high-end expressions.
Indeed, the only real challenges ahead are meeting the demand and navigating the supply chain crisis that’s impacting all drinks categories.
According to IWSR Drinks Market Analysis, Tequila volumes outside Mexico and the US grew by around one-third last year to total about 5.5m cases — a barnstorming performance, driven by rising consumer demand and the reopening of the on-premise in many countries.
The top three international markets for Tequila are Canada, the UK and Colombia. Pernod Ricard’s House of Tequila unit, which handles the group's Altos, Olmeca and Avión Tequila brands, reveals that combined sales of the three by value grew by over 50% in the 12 months to the end of June. “All of our brands are leveraging the growth of Tequila and mezcal outside of the US, and gaining market share in most key markets," said portfolio activation director Charles Dos Santos. "More specifically, we’ve seen double-digit growth for Altos and Olmeca (+70% and +40%, respectively), while Avión has grown 250%.”
Also reporting a rise in sales is Destileria Orendain, a producer whose portfolio includes Gran Orendain, a 100% agave tequila, Orendain Blanco, the best-selling mixto Tequila in Mexico, and Imperio del Don, a 100% agave expression aged for ten years. Global commercial VP José Sandoval tells Global Drinks Intel that the company's leading export markets, which include the UK, Canada, Australia and Guatemala, have seen H1 sales increase by an average of 25%. “So far this year," he says, "we've entered new markets, such as Hong Kong, Greece and South Korea, and are also working on distribution agreements in a few more.”
Family-owned Cazcabel Tequila is similarly upbeat. According to family member Uziel Vazquez, the company is on course to exceed sales of over 200,000 cases in 2022. He points to strong sales in developed Tequila markets such as Australia, New Zealand, Sweden and the UK, but also developing markets in Central Europe. “In the last year, we’ve launched in ten new markets and have several more opening up later in 2022,” he says.
Suppliers agree that it's the more-premium Tequilas that are powering the segment internationally rather than cheaper mixto varieties.
“It’s 100% agave Tequilas that are driving growth and driving consumer and trade interest,” confirms Chris Moran, founder & CEO of Ghost Tequila, which has seen strong growth in the Caribbean and Australia of late. “Increasingly, people understand the very significant differences in taste and quality between a 100% agave Tequila and a 51% agave mixto Tequila.
“What’s interesting is that some mixto brands are actually deliberately hiding the fact that they’re a mixto because they know that consumers want that higher quality that only comes from a 100% agave Tequila.”
Steffin Oghene, a brand representative for El Tequileño, a premium tequila with growing international sales in Canada, the UK, Australia and Guatemala, believes the appearance of Tequila-based cocktails in upscale bars and restaurants worldwide is a clear sign of the segment's premiumisation trend. “The quality and versatility of the category lends itself for use within craft cocktails in all styles of venues,” he says. “We're also witnessing an increasing number of brands on back bars and in liquor stores everywhere, showing the demand from consumers to have variety.”
Increased consumer and trade education is crucial to continuing this process of premiumisation, argues Pepijn Janssens, CMO at Amber Beverage Group, the owner of the KAH and Rooster Rojo Tequila brands. “We do this very actively through our global brand ambassadors and at Tequila festivals in different markets,” he explains. “COVID forced us to reduce our effort for the festivals, but this year we plan a very active presence, as well as at global exhibitions such as ProWein, Bar Convent Berlin, Roma and the Athens Bar Show.”
Janssens believes consumer education is the key. “There are still many prejudices about Tequila and a lack of awareness about how 100% blue agave Tequilas differ from mixto; how gold Tequila is different from añejo or reposado, and so on,” he says. “Luckily, consumers are interested in trying new things and willing to listen when brands have relevant stories to tell.”
Investment drives growth for Sierra Tequila in Germany
A useful case study for Tequila's international growth is Germany, where sales volumes were up 15% over the first six months of 2022, according to Nielsen figures. Sales of the leading brand in the country, Sierra Tequila, rose even faster over the same period, jumping 20%.
“This is due to our strong investment, including Social Media communication, campaigns, limited editions and on-packs in retail that are paying off and driving the success of the brand,” says a spokesperson for brand owner Borco. “The exceptional success encourages us to further develop the brand in the German market and abroad. From mid-July, we started a new digital campaign in Germany, focusing on addressable TV, Social Media and cooperation with influencers to boost brand awareness and user-generated content, which is key to the brand strategy.”
Sierra Tequila holds a remarkable 96% market share in Germany but the brand, famous for the sombrero hat that adorns the top of the bottle, also enjoys healthy showings in Sweden (52% share), Denmark (62%) and Hungary (62%).
“In 2021, the sales volumes of Sierra Tequila grew strongly in all regions worldwide," according to the spokesperson. "It is now the No.1 Tequila growth brand in Europe with the highest absolute volume growth of all Tequila brands in Europe in the last three years [IWSR 2022]. Building the brand further in our export markets with a consistent visual language and tone of voice, while identifying new potential for growth, are key strategic pillars.”
Like Germany, the UK is becoming a very promising market for the sector. “In the UK, prestige Tequila is very much an emerging segment,” notes Mike Dolan, co-founder of Mijenta Tequila, which launched in the UK last year. “As consumers have become more knowledgeable and discerning about high-quality Tequila, it has become what is probably the fastest-growing sector in UK spirits. In fact, the more premium the Tequila, the faster the growth rate.
“Anecdotally, this is very apparent in bars and clubs. In the past, there were maybe one or two sipping Tequilas on the back bar, but now there'll regularly be ten or 15, both blancos and aged varietals. Obviously, this amounts to a tremendous opportunity for Mijenta, and we’re excited that we’re well-positioned to take advantage of it.”
With sales rising internationally, meeting demand, particularly for aged spirit, is a growing challenge for producers, especially at a time of soaring costs and supply chain bottlenecks. “The supply chain crisis has affected - and is still affecting - all Tequila brands, including ours,” confirms House of Tequila’s Dos Santos. “The combination of dry goods shortages, international shipment shortages and — in the case of Tequila and mezcal — a rise in demand that's difficult to forecast because of more dynamic spirits categories, has impacted our ability to service our clients.”
Despite these challenges, it’s clear this is an exciting period for Tequila internationally. Gordon Dron, MD of Cuervo's Proximo Spirits division, which handles the likes of José Cuervo and 1800 Tequila, even notes a change in fortunes in Asia-Pacific, not traditionally a Tequila stronghold. “While brown spirits are still very much favoured, white spirits are growing in popularity as demonstrated by the accelerated growth in recent years. Particularly between 2020 and 2021, with vodka up 10.3%, gin +10.1% and Tequila +15% in volume.
“Despite Tequila being the smallest category among spirits, across both volume and value, it's still the fastest-expanding category, with growth of 22.1% in value and 15% in volume between 2020 and 2021 across Asia-Pacific [including the region's Global Travel Retail].”
Tequila in international markets clearly has a long way to match the runaway success it has experienced in the US, where sales approached 29m cases last year, according to Statista. But, as demand for 100% agave sipping Tequilas and Tequila-based cocktails grows worldwide, the future for this dynamic category seems bright.
This article was initially published in the September issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
