With only around one in 10 bottles of tequila sold outside the US and Mexico, there is plenty of room for the agave spirit to grow. By Joe Bates
The pandemic took its toll on tequila in international markets last year. Volumes outside the US and Mexico dropped around -24% to total about 4m cases, according to IWSR Drinks Market Analysis. The prime suspect for this substantial drop was the on-trade which took a mighty hit from Covid-19. Russia, the fourth-largest tequila market, suffered a -21.1% slump in sales in 2020, while Germany, Japan and the UK (placed sixth, eighth and ninth respectively), endured drops of -19.6%, -16.5% and -36%.
In contrast, Canada, the third-largest market for tequila and a country which battled Covid-19 comparatively well, bucked the trend, registering a 2.7% increase in 2020. Similarly, Australia’s zero-Covid-19 strategy enabled it to minimise restrictions, making it a star performer among international tequila markets. Last year, tequila sales in Australia soared 31%. The outlook for 2021 is less clear — as Intel went to press, four states/territories were under tight restrictions — but tequila brands are queuing up to make it big Down Under.
One such aspirant is craft brand Vivir Tequila, which launched in the UK last year and is now entering the Australian market for the first time. “Australia was always a very important target market for us as it is an emerging market for the category, just like the UK, and we thought we could replicate our success there through a similar approach,” says co-founder Paul Hayes. “Australia is also the fifth-largest tequila-consuming country in the world, ahead of even the UK, and we could see it was growing rapidly.”
Larger, more established tequila brands are also prospering in Australia. Nikolas Odinius, communication manager at German spirits producer Borco-Marken- Import, says its Sierra Tequila brand is performing at a “very high level” in Australia this year and achieving “constant gains in market share”. Similarly, Campariowned Espolòn achieved a 60% spike in sales in Australia in 2020, according to Campari Group global managing director GSM spirits Julka Villa, making the brand the third best-selling in the country.
The UK was one of the countries worst affected by Covid-19 in 2020, resulting in repeated lockdowns. Yet strong off-trade and online sales during 2020 and the country’s swift vaccination roll-out allied to the reopening of the hospitality sector, are encouraging tequila producers large and small to invest there. In July, Moët Hennessy announced the launch of its Volcan De Mi Terra brand in the UK, only the third market the 100% blue agave tequila is available in after the US and Mexico.
Meanwhile, 1800 Tequila, owned by the Beckmann Family, chose London’s trendy Soho district this summer as the location for a collaboration with famous streetwear artist Daniel Cordas. The millennial and Gen Z-targeted activation saw 1800 Tequila and Cordas invite sustainable fashion brands to showcase their work and give people the opportunity to get their trainers signed by Cordas. The collaboration also involved 1800 Tequila setting up a pop-up bar serving cocktails inspired by Cordas’s shoe designs.
The lockdown period in the UK gave rise to several tequila startups. Consider the case of bottled tequila cocktail brand Pimentae, which was launched by entrepreneurs Alice Parmiter and Wynter Karo. Described as an “alternative to barmade cocktails”, the brand’s flagship ›› product is Tommy’s Chilli Margarita: a blend of Olmeca Tequila, lime, agave and chilli made without artificial colours or sweeteners. The bottle label features bespoke artwork to encourage upcycling.
Another startup brand launched in the UK during lockdown was Storywood Tequila, a two-strong range of 100% blue weber agave tequilas aged in Scotch whisky casks. Storywood Tequila is available in the UK, Sweden and Australia, with a US launch pencilled in for later in 2021.
“Storywood was created to give whisky drinkers, like myself, another option,” reveals company founder Michael Ballantyne. “It was never about changing people over from whisky; it was about educating people who already understood that sipping culture and bringing them into the agave category. I wanted to create almost my own section in the category where people try new oak expressions rather than the typical Bourbon barrel-aged stuff that is the majority of the market.”
Premiumisation push continues
The pandemic has not derailed tequila producers’ efforts to premiumise the category outside the US and Mexico, according to IWSR analyst José Luis Hermoso. “The arrival of cristalinos to export markets outside Mexico and the US is pretty recent,” he explains. “This boosted average tequila prices (most cristalinos are premium-plus) in a category with little pricing flexibility already, as strong demand in the US keeps agave prices at record levels. Essentially, if tequila continues to perform in the US as strongly as in recent years, the risk of downtrading in other export markets remains very small.”
Campari’s Villa agrees the cristalino subcategory is on fire. She believes the new Espolòn Cristalino, which was launched in Mexico in June, can do well in international markets too. “The packaging is beautiful — we took inspiration from the mystical properties that the Mayans associated with Mexican cenotes,” Villa says. “We have this crystalline liquid in a beautiful, crystal-clear bottle, stripped of the regular Espolòn labels and highlighting the purity of the liquid. The profile is really silky and aromatic, with some subtle oaky and fruity notes, but retains that classic, unmistakable blue agave flavour profile.”
A rise in consumers buying online to experiment with at-home cocktails has been seen in numerous spirits categories and tequila is no exception. Patrón was one of many brands that pivoted in response to the lockdown trend. Patrón president and CEO Mauricio Vergara says: “We were quick to adapt to the at-home lifestyle, with the Patrón Pantry Challenge which brings our community of bartenders — Patrón Perfectionists — together to inspire people to craft unique drinks with what is in their pantry. As people embraced at-home mixology, we added strong e-commerce layers to the bulk of our marketing and sales efforts. We saw unprecedented growth in the space with our digital commerce business growing five times compared with last year.”
Pernod Ricard House of Tequila managing director Michael Merolli takes a similar tack, arguing that the pandemic-enforced lockdowns have encouraged trading-up, self-discovery and experimentation. “Despite the almost continuous shutdown of the on-premise over the past year, the tequila category has proved resilient — particularly at the more premium end, as shoppers trade up to recreate the restaurant/ bar experience at home,” he says, adding that the company’s flagship international brand, Olmeca Tequila, continues to perform well in key export markets.
“Like many brands, we have been impacted by the on-trade shutdown,” Merolli says. “As such, we were forced to switch our focus to off-trade and e-commerce. We were positively surprised by the significant growth that Olmeca achieved in these channels, as drinks enthusiasts enjoyed recreating their favourite cocktails in their own homes. Despite the on-trade reopening in a number of markets, we expect the trend towards at-home drinking to remain popular — and our off-trade strategy is now well-equipped to deal with this sustained demand.”
Building a new image
Outside the US, tequila has a lingering reputation as a cheap, shot-oriented spirit — an image that producers are trying hard to dispel. “Consumer and on-trade perceptions of tequila are changing,” according to Borco’s Odinius. “Mixologists and spirits connoisseurs alike have been discovering Mexico’s national spirit in a new light. They are attracted to brands that combine an intriguing background story with quality and are willing to spend more money on tequila. This changing perception offers great opportunities to showcase this fascinating spirit and engage consumers with contemporary creative concepts surrounding the traditions of tequila and its different uses.”
To capitalise on the premiumisation trend apparent in international markets, Borco recently relaunched the packaging for its 100% agave Sierra Antiguo line.
Also convinced about the changing image of tequila in international markets is Chris Moran, founder and CEO of small-batch 100% agave Ghost Tequila. “Just like we’re seeing global interest in craft gin, vodka and whisky, there’s enormous potential for innovative craft tequila, especially among consumers and bartenders in international markets where awareness of 100% agave tequila is growing fast. Now that people increasingly recognise the different nuances of this spirit, they’re not only interested in drinking the usual large global brands.
“They want tequilas with diverse taste characteristics and versatility, and that’s exactly what we offer in Ghost Tequila — a 100% agave spicy tequila that adds a balanced, flavourful spice to any cocktail.” In summary, the outlook for tequila is a bright one. Mexico’s most famous spirit has much room to grow, with international markets only accounting for just over 11% of total sales in 2020 (IWSR). ●
