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The US remains where the big bucks are for tequila brands, but producers still see considerable potential in more distant markets.
If there's one number that best describes the length of runway available for tequila internationally, it’s that only 15% of the segment's volumes are currently sold outside the US and Mexico.
Given this sobering revelation from IWSR Drinks Market Analysis, some observers have argued that there has been little incentive for tequila brand owners to invest in developing their export businesses while making so much money closer to home - an economic reality that has been cemented by the current constraints on the supply of agave.
Yet, despite the continued strength of the US - along with the high agave prices - many brand owners still place importance on building international markets. As Proximo Spirits MD Gordon Dron says: "There is a massive opportunity for tequila beyond the US and Mexico, as consumer demand for different and interesting liquids and propositions continues to grow globally.” In 2022, according to Dron, sales volumes for Proximo’s tequila portfolio, which includes the Jose Cuervo and 1800 brands, grew 21.7% in the Europe, Middle East & Africa and Asia-Pacific regions.
“Internationally, super- and ultra-premium tequilas have the best outlook on volume and value growth into 2026, as it's estimated they will represent 55% of value share by 2026 [IWSR, 2023],” he adds. “Yet, there's still white space for more luxury tequila propositions, as this segment has fewer brands than other categories such as rum, Cognac or Irish whiskey.”
Charles Dos Santos, business acceleration VP at Pernod Ricard’s House of Tequila division, which controls the Olmeca, Avión and Altos brands, points out that tequila and mezcal are both premiumising faster internationally than in the US. “In many of those markets," he says, "there's a lot to be done in terms of education on agave spirits. There’s a long journey ahead before consumers appreciate high-quality tequila, but the growth potential is very strong here.
“Outside of the US and Mexico, the UK, Australia, Canada, Italy, Colombia and Turkey are our most promising and dynamic markets,” he adds. “Here, we’re witnessing a strong trend towards premiumisation, which has led to strong growth across our portfolio.”
Similarly, Heaven Hill Brands, a company better known for its sizable American whiskey portfolio, has high international hopes for its 100% blue weber agave, Lunazul Tequila. “IWSR data projects growth in several markets outside the US, Mexico and Canada up to 2027,” notes MD Bryan Fallon. “We're analysing this, along with reviewing our distribution and other commercial factors, to craft an international strategy for Lunazul Tequila. This strategy will determine our priority markets for the next five years.
“Duty free will be a focus for Lunazul, and insight suggests that Australia and the UK are both poised for growth in premium and super-premium tequila,” he adds. “As such, we'll be putting plans in place to assist growth in these markets.”
Fallon describes Lunazul as “a premium but accessible product that has offerings across styles, expressions and price points through its añejo, reposado, Primero (cristalino) and El Humoso (Smoked Blanco) extensions”. The brand has now shipped more than 1m cases and is an “undeniable success”, says Fallon, adding that it is “growing at 46% and, according to IWSR, is the eighth-largest 100% agave tequila”.
Duty free secures second place in export rankings
Heaven Hill’s decision to focus on global travel retail is a smart move - Last year, the channel was the second-largest international market for tequila, after Canada, recording a giant 95.2% upswing off the back of the recovery of international travel. The future looks rosy too; IWSR predicts that over the next three years, tequila volumes in GTR will grow at a CAGR of 9%.
The large brand owners are starting to take travel retail more seriously. In July, Proximo opened a three-month pop-up store in partnership with International Shoppes at JFK Airport in New York, to highlight its Maestro Dobel brand’s ‘Official Tequila of the PGA Tour & PGA Tour Champions’ status.
Similarly, in the last four months of 2022, Bacardi Global Travel Retail teamed up with Dufry to stage a major Patrón activation at London Heathrow in what was the brand’s biggest GTR promotion to date. Targeted primarily at UK and US travellers, the 'Experiencia Patrón' promotion featured an agave-inspired brand space complete with cocktail bar, gifting station and digital displays. Pride of place was given to Patrón en Lalique: Serie 3: a higher-end extra-añejo expression presented in a Lalique decanter and priced at US$7,500.
Margarita drives tequila conversion
In domestic markets, many brand owners rely on the enduring popularity of tequila-based cocktails such as the Margarita and Paloma to pivot the category away from the traditional shot serve, a consumption occasion associated with cheaper mixto tequilas.
Such is the popularity of the Margarita that new tequila brands are springing up to capitalise on its success. Neurita, for example, is a flavoured tequila, infused with natural fruit extracts including raspberry, strawberry, pomegranate and citrus, that launched in the UK last year.
“Neurita Tequila omits the need for triple sec in the world’s highest-trending cocktail - the Margarita,” says founder Lucy Smith. “This means Neurita Margaritas are quicker, simpler and have a gross profit saving per serve in bars. Neurita is also perfect for Palomas. These key points have landed well in both the on- and off-premise.
“After a successful UK launch, Neurita is scoping out export markets, as we see the opportunity for tequila growing across the world,” adds Smith. “Key factors for us are the influence that trends in the US have on other markets, such as Australia and Europe.”
In a similar vein, earlier this year, mixologist Deano Moncrieffe, founder of the Hacha tequila cocktail bar in London, launched ready-to-serve Mirror Margarita in the UK through multiple retailer Sainsbury's. Made with 100% agave Blanco Cazcabel Tequila, the clear cocktail is blended with citrus oils and malic acid produced naturally by the agave plant.
Cocktails versus shots
On the broader question of which cocktail strategy works best for tequila, the chief marketing director at Amber Beverage Group, Pepijn Janssens, has an easy-to-remember philosophy: “Buy complex, make simple," he says. "That's perhaps the way to sum it up.”
“The increasing interest of bartenders and consumers in premium and premium-plus tequilas means the complex agave notes of well-crafted tequilas don’t need masking. The salt-and-shots days are a thing of the past. By using tequilas that include complex, agave-rich taste notes, we can make simple cocktails that enhance the flavour of the spirit.”
Not every brand owner is willing to give up on the time-honoured shot serve, however. “The shot ritual - and sipping from a shot glass in general - is a prevalent, growing trend that's here to stay,” says Carlos Andrés Ramírez, global advocacy & PR manager at the House of Tequila. “This is especially true in markets like Latin America, Asia, Eastern Europe and Africa, where the tequila category is growing at an impressive rate.
“With this in mind, this year we reformatted our 'Olmeca Shot Ring' competition to involve the consumer more by enlisting relevant influencers within the bartending community to compete. We set out to prove that these types of competitions can retain their relevance for consumers, while also maintaining the fun, party spirit of our Olmeca brand.”
Standing out from the crowd
What producers can agree on is that in the increasingly competitive environment, brands need a distinctive USP. The co-founder of Mijenta Tequila, Mike Dolan, believes that brands with credible sustainability credentials have the best chance to thrive.
“In addition to the quality of our tequila, the other element of the brand that has resonated is our commitment to sustainability,” says Dolan. “We were the first tequila to earn B Corp certification, which is a recognition that's incredibly significant and is well appreciated in international markets.
"Joining the B Corp community was an important validation for us of everything we’ve worked to do from the beginning. To give just one example, all of our packaging is eco-friendly: the bottles are made from recycled glass, the labels from upcycled agave waste and the boxes from 100% post-consumer recycled paper.”
An eye-catching flavour profile is another way to stand out, according to the CEO of pepper-infused Ghost Tequila, Jeff Popkin. “Because it's a spicy spirit, not only are we focused on top tequila markets, but we’re also looking at Asia and parts of Latin America where spicy is so predominant,” he says. Ghost Tequila is currently available in around 30 markets in the Americas, Europe and Asia.
Individualisation is key to building an export strategy, counsels Gaston Martinez, co-founder & CEO of California-based IZO Spirits, which is present not only in tequila and mezcal but also in sotol.
“I advise companies looking to export their products to place particular importance on authenticity, differentiation and market research,” he says. “Highlight the distinct elements of your brand and products while understanding each target market’s preferences. Furthermore, establish strong relationships with distributors who share your vision.”
That's sage advice for those brand owners planning to reach beyond the US and Mexico mainstays to surf tequila's international wave.
This article has been available to Global Drinks Intel subscribers since August. For details on how to join them, please click here.
