In the US on-premise, consumers are embracing Tequila like never before – in cocktails, as shots and in neat pours. CGA delves into its latest data and finds a category in firm ascension.
Tequila is one of the most popular spirits globally, but North America is where the category really demands attention. The segment’s popularity has grown significantly in recent years thanks to its evolution to meet different tastes and preferences. It remains clear that Tequila is continuing its run as a top three performer in the US on-premise channel. While whisky/whiskey and vodka are secure in retaining the top spots, Tequila, as the only major spirits category to show share growth so far this year, is outpacing its counterparts in more than one price tier.
The big picture
Considering the rolling 52-week period to the end of March, CGA by NielsenIQ’s ‘On Premise Measurement’ (OPM) data shows that over the last year, spirits generated sales of around US$45.6bn in the US on-premise. This is the result of total spirits posting an impressive 126% compared to the same period a year earlier when COVID-19’s impact was at its height.
In terms of the big picture, spirits continues to hold the dominant share of total alcohol in the on-premise, representing 45.4% of the total read (beer/FMBs, spirits and wine combined). This reflects the share-stealing trajectory of spirits in general over the past two years; the category has increased its share by 1.9% from Q1 2020 to Q1 2022. For a share comparison, beer was down 1.4 ppts and wine down 0.4 ppts since Q1 2020.
Stealing share from whisky and vodka in every price tier
While spirits has continued to take share from its alcohol counterparts, some small shifts are coming from within the category that are worth spotlighting. In terms of raw volume sales, whisky/whiskey and vodka continue to be the two dominant sub-groups, with the two combining to make up more than 51% of total spirits in the on-premise: Year to date, whisky/whiskey accounts for 26% and vodka 25%, respectively. Tequila, while representing 18% year to date, is the only segment that has achieved share growth of over 1%. In fact, compared with the same period last year, Tequila has achieved a notable 2% share of spirits, while whisky/whiskey, vodka, gin, Cognac and brandy all lost a fraction of the pie. Rum and cordials have seen modest share growth in the category, both inching up 0.1% year to date.
A deeper look into category price tiers reveals some notable stories for Tequila. In terms of year-to-date growth, it’s up 70% over last year in volume sales, and its per-cent change in value terms has been higher in every price tier versus the equivalent tier in whisky/whiskey and vodka.
Tequila is demonstrating stronger sales across all tiers, from value to ultra-premium, than its rivals thus far into 2022. In terms of raw dollar sales, the most recent data shows Tequila generating more than $8bn over the last 52-week period.
Furthermore, a measure of Tequila sales volumes over the year to the end of May shows the average of its price tier per-cent growth at 116% compared to the same period a year before. As stated earlier, all price tiers are adding to that volume performance, but remarkably, it’s the ultra-premium (+171%) and premium (+133%) tiers that lead the way for the segment’s share grab. For comparison, vodka’s average per-cent growth across all price tiers was 89%, led primarily by its mid-priced tier, and whisky/whiskey’s tiers averaged 97%, led by ultra-premium across the 52 weeks.
Premiumisation, a wider trend to watch, continues to be a factor in disrupting share among spirits in the sales channel. From a supplier and operator perspective, this data shows that Tequila should be a focus category, with room to build action plans around all price tiers.
Tequila’s growth in popularity with the US consumer
While the OPM data paints a picture of beverage alcohol performance in the American on-premise, CGA’s ‘On Premise User Survey’ (OPUS) considers the consumer perspective. Insights from the survey highlight the types of products, substyles and flavours that US consumers enjoy the most when visiting bars and restaurants, suggesting where brands and operators could take advantage of style potential.
The preferences of US consumers in the on-premise reveal some of the reasons for Tequila’s apparent success. Specifically, it would be remiss to not mention the ubiquitous Margarita as a perennial No.1 cocktail across categories. This is supported by BeverageTrak data, which highlights that the Margarita is the most popular cocktail by value velocity for 43 of the 48 US states within the cocktail read.
While the base of a Margarita is (nearly) always Tequila, there’s a wealth of opportunities for selecting a variety of fruit flavours, mixers and the tantalising option to trade up to premium or ‘Cadillac Margarita’, giving the drink a more customisable experience over other, familiar cocktails. For example, the most popular cocktail flavours typically consumed by on-premise visitors are strawberry, pineapple, lime and mango, all of which can be typically made available in a Margarita serve. Unsurprisingly, the Margarita appeals to all ages as well, ranking as the most popular among 21-34, 35-54 and 55-plus age groups.
Silver or Blanco Tequila continues to reign as the highest sales sub-category, representing about 55% of all category volume over the 52-week period ($3bn). This is reflective of Silver Tequila’s versatility in how its typically served — in cocktails, shots or neat — as well as its appearance in multiple price tiers (which, as previously mentioned, are all in growth). While Añejo and Reposado combined account for just 21% of the total share of Tequila sales, both have shown high growth, with Añejo up 122% and Reposado +133%.
New occasions and serve styles
Premiumisation is driving consumers to trade up in their preferred drinking categories and is also providing new serve-style and occasion opportunities with Tequila. While most Tequila drinkers enjoy the spirit in a cocktail, 42% enjoy the spirit as a shot and 20% say they order Tequila as a neat pour. What this shows, alongside the ultra- and super-premium price tier growth, is an expansion for the segment from its most recognisable serves into new occasions. Though Añejo and Reposado aren’t excluded as potential picks for a Margarita or shot, they are more commonly associated with a sipping occasion, in premium cocktail bars, for example.
Following this premiumisation trend is Cristalino, an innovative product that is the result of filtering (typically via charcoal) Aged Añejo, Extra Añejo, Reposado or a blend of all of these, resulting in a clear appearance. The filtering not only removes the colour but also reduces the more pronounced wood-derived flavours, leaving subtler touches of barrel-ageing such as cocoa and vanilla with the agave brightness of a Blanco. Priced in the super- and ultra-premium tiers, and with complex tasting notes and aromatics, Cristalino is poised to succeed among occasions that are more sip-led, typically inhabited by high-end whiskies.
Tequila’s innovation and the drive towards premiumisation shows why the segment can continue to take share from its established spirits competitors in higher price tiers. What will be vital for suppliers and operators is collaboration — to improve their Tequila offering and identify which further opportunities can be capitalised on.
This article was initially published in September’s issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
