How tequila has broken out of its North America playpen - Category Intel

As the US tequila boom ends, brand owners are eyeing export markets across Europe, Asia and beyond to fill the void
Recruitment into the category could be aided by the presence of tequila-based liqueurs with approachable flavours and lower alcohol
While the margarita remains a key tequila cocktail, the bitter flavours of the paloma are resonating with consumers, especially in Southern Europe
Consumers in more developed markets are already beginning to progress from cocktails to neat consumption of añejo and extra añejo tequilas
However, some brand owners believe that the category needs to be established at scale before pushing luxury products

The tequila category’s success has been built squarely on the huge US market but, as demand in the country softens, brand owners are looking further afield for future growth.

While tequila has been the biggest success story of the spirits industry in the 21st Century, that status has always been accompanied by a significant caveat: the fact that the US accounts for more than 80% of export volumes. The next-biggest markets – Spain and Germany – can’t even muster 2% each.

Now, as the agave boom comes to an end in North America, could that be about to change?

Brand owners are certainly talking a good game. “While the US continues to be a crucial market, the cooling demand for tequila underscores the necessity for a diversified global growth strategy,” says Michael Merolli, CEO of Pernod Ricard’s House of Tequila, encompassing brands including Avión, Código 1530 and Olmeca Altos (above).

“By expanding our portfolio in high-potential markets across Europe, Asia and Latin America, we can tap into the increasing consumer interest in premium spirits, extend our geographical footprint, and drive growth while leveraging the strength of the Pernod Ricard distribution network and the existing positive footprint of our tequila brands in these markets.”

The founder of Padre Azul, Hans-Peter Eder, sounds a similar note. “In the light of the US tequila market’s recent demand slowdown and ballooning inventories, it is increasingly important for Padre Azul to diversify geographically,” he says.

“While the North American market remains critical for us, we see 2025 as a pivotal year to accelerate our efforts in Europe and Asia. By focusing on international expansion, we are both mitigating risk from a single core market and leveraging opportunities in regions where consumers are now embracing tequila at an early stage in the category’s development.”

It may be early days, but tequila is already posting some impressive numbers. Hendrik Schatz, CMO of Stock Germany, whose parent company owns the Sierra tequila brand, highlights IWSR data showing that between 2019 and 2023, tequila volumes in Europe grew by 49.9%; in Asia Pacific and Africa/Middle East, the trajectory was even steeper, at 61.2% and 85.7%, respectively. This growth has occurred off a small base but, as Schatz says: “In these regions, tequila is just taking off.”

The potential is spread across a range of markets. “We‘re seeing the continued emergence of premium tequila across Europe, and we’re excited about the potential in Asian markets, particularly China, where the younger generation is engaging more with mixable spirits,” says the global marketing director for Vamos Drinks/Cazcabel Tequila, Chris Richards.

Recruitment, he adds, is aided by the presence of flavoured Cazcabel tequila liqueurs, which can drive trial among wary consumers. In similar fashion, Stock has been pushing a new Sierra extension over the past 18 months: Sierra Tropical Chilli is an 18%-ABV liqueur combining flavours of chilli and tropical fruit. Schatz says: “Consumer response to Sierra Tropical was fantastic, and the product has helped to recruit new consumers to the tequila category.”

(Figures extracted in early January 2025 and may not be full-year for all countries. Russia may still be a top ten market if shipments to Latvia are taken into account, although there was a steep fall in 2024)

The paloma opportunity

Pernod Ricard’s House of Tequila unit oversees a diverse portfolio capable of tapping into a range of different market trends, from premium brand Olmeca through super-premium Altos to Avión and ultra-premium Código 1530. Merolli detects a growing appreciation among consumers for 100% agave tequila and for cocktail serves such as the margarita, the paloma, the twisted negroni and martinis.

“This shift is evident in markets like the UK, Italy and Australia, where consumers now view tequila as a premium spirit meant for savouring neat or in sophisticated cocktails, rather than as a low-quality shot,” he says. “Additionally, there’s been a rise in the consumption of paloma cocktails … especially in Southern Europe, mainly in Italy, Spain and Greece.”

This latter trend is also identified by a Diageo spokesperson, who explains: “In Europe, we identified that the paloma was an emerging cocktail of choice for bartenders and brand ambassadors. We jumped on this by showcasing the Casamigos paloma across Europe, including in the UK, through activations at various events such as the British Summer Time Festival and All Points East.”

Bacardí’s Patrón is also eyeing opportunities in Europe, Asia and Latin America. The VP of international markets for the brand, Ariel Suffern, says 2025 will be a year of “balancing and expanding our global footprint”, adding: “Spain, in particular, boasts a substantial and influential Mexican community that significantly contributes to the evolution of tequila. The country also features a sophisticated and refined on-premise sector, particularly in cosmopolitan cities like Madrid and Barcelona.”

Local market nuances

While tequila has potential in a host of markets, brand owners are cognisant of the need to adapt their strategies to local conditions. “While North America is driven by younger, aspirational drinkers, international markets often see an older, more affluent consumer who’s already familiar with premium spirits and ready to expand their repertoire,” says Christophe Hermet, international marketing director at Casa Komos Brands Group, owner of Tequila Komos.

“Consumption occasions differ too. In Europe, we initially saw people enjoying tequila in high-end cocktails, but now see people enjoying them as a digestif, as they would a cognac. In Japan, the focus is more on deliberate, neat enjoyment.”

In the most developed markets, the sense is that some consumers are already moving beyond cocktails to neat consumption. Padre Azul’s Eder reports a similar progression – alongside new shot variations at high-end ski resorts in the Alps – while Patrón’s Suffern predicts a “continued but accelerated shift” towards aged expressions and more sophisticated consumption habits.

The obvious temptation is to try to globalise the success of ultra-premium tequila in the US, but Cazcabel’s Richards is wary of moving too fast here. “The tequila boom in more super-premium products in North America only happened once the category was established and there was consumer understanding of the category,” he explains. “I believe the biggest opportunity lies in establishing the category at scale in global markets before there is a push for luxury products.”

For this reason, ultra-premium brand Mijenta remains “hyper-focused” on the US market, according to CEO Michael Dolan. “We take a very targeted approach with international markets, which are a few years behind where the US is in terms of category maturity,” he says.

“Overall, there’s a bit more price sensitivity, so we’re focused on winning in the top end of the on-trade as we enter key cities around the world.”

In this rarefied part of the market, the focus is not so much on countries as individual cities and the finest bars within them. “A few key places where we’ve found that Mijenta resonates include London, Madrid and Barcelona, Amsterdam, and Dubai, all of which have thriving bar cultures,” Dolan (below) explains. “We’re also gaining more traction in resort areas across Central America and the Caribbean, which we see as another ripe area for growth in tequila consumption.”

Is celebrity tequila on the way out?

Even as brand owners focus on building the tequila category around the world, many of them - including Mijenta CEO Dolan – remain “hyper-focused” on the US market.

Given that IWSR projects a compound annual growth rate (CAGR) to 2028 of more than 10% for ultra-premium tequila, that’s hardly surprising. “Looking at sales data from another angle, the other thing we see is really a ‘tale of two cities’ in the category,” says Dolan. “On the one hand, sales of celebrity tequilas are falling off dramatically. At the same time, additive-free brands [including Mijenta] are growing at ten times the rate of the tequila category overall.”

This victory of substance over style is echoed by the international marketing director at Casa Komos Brands, Christophe Hermet, who reports consumer “fatigue” around celebrity driven tequilas.

“That’s why we’re leaning into thoughtful marketing and focusing on value, not just price,” Hermet explains. “That means amplifying our story. We’re doubling down on our commitment to sustainability with our Komos Foundation, where we’re using waste from agave production to build schoolhouses in Tequila, Mexico.”

The foundation repurposes agave waste into adobe bricks, which are used to build local infrastructure. The charity recently opened its first completed schoolhouse in Amatitán, and plans to build six more in the region during 2025.

Going global

The transformation of tequila into a globally significant spirits category will take time, money and energy, but brand owners are sounding increasingly confident and determined that it can and will happen.

“Given tequila’s versatility and the wide array of options available – from silver to reposado and añejo, to the diverse price points – it has the potential to surpass the popularity of gin,” says Bacardí’s Suffern.

“Tequila is no longer just a North American darling, it’s a global spirit,” adds Casa Komos Brands’ Hermet. “We’re finding the world is increasingly curious about high-quality agave spirits, especially in Europe and Asia. With continued education and increased availability, tequila will achieve a global cultural footprint similar to whisky or cognac.”