Tequila`s Top Dog

T
equila’s Top Dog
The Multi-Faceted
Category Continues
to Grow
By Jeffery Lindenmuth
T
equila may be tiny as spirit
categories go, with sales of
about 10.5 million 9-liter
*
cases in 2007 , but like the tenacious
Chihuahua this tiny Mexican purebred
shows plenty of fight, exhibiting
diversity and innovation that allows it to
compete on almost any turf. From highend bottle service to mixology beyond
margaritas, Tequila is finding a place
among the spirits elite.
While the popular “gold tequilas,” which are
classified as mixto and typically contain the minimum
51% agave, still account for about 50% of Tequila
sales in dollars, the greatest growth is occurring in
the 100% agave brands which comprise nearly
entirely of the super-premium portion of the
category. Always marked with 100% agave on the
bottle, these spirits represent the Tequila elite
*According to the Distilled Spirits Council of the United States
Category focus
and may be classified as blanco, reposado
or añejo according to their degree of aging.
Their growth has averaged about 80% over
the past five years, compared to the overall
category’s 8.8%.
Blanco ~ “Un-aged or aged
briefly in stainless steel”
According to Nielsen Scantrack and Liquor
Track reports for the 52-week period ending
May 2007, silver Tequila, which consists
mainly of 100% agave blanco, accounted for
20% of total Tequila sales. Super-premium
silver category leader Patrón Silver has ridden
the wave of Tequila knowledge and American
consumers’ growing acceptance of blanco
Tequila as they migrate away from “gold”
mixto. “When we launched in 1989, Añejo
was our #1 seller,” says Matt Carroll, Patrón
chief marketing officer. “In the consumer’s
mind, they were supposed to be drinking
gold-colored Tequila. As the brand grew,
Silver passed Añejo, and Patrón Silver now
outsells our Añejo and Reposado combined.
It has been the strongest seller thanks to its
versatility and I don’t see that changing.”
While blanco does not require aging and
is therefore usually the lowest-priced among
the three styles for any 100% agave brand,
it is not a one-dimensional category. “The
silver grade of Tequila has the largest share of
the premium category for a few reasons: it is
the entry level, most mixable, least expensive
Tequila and benefits from several well known
brands which have transcended the category,
and are recognized by non Tequila drinkers,”
explained Richard Chianese from Trago
Tequila, a super-premium producer focusing
on high–end blanco, reposado, and añejo
Tequilas.
Other groups have also been responsible
for getting blanco tequilas into the limelight.
Jose Cuervo’s recently released Jose Cuervo
Platino, priced at $60, has been written up
in Vanity Fair, Portfolio, Men’s Vogue, GQ,
Gotham, LA Confidential and Chicago Social
and it has been validated with a score of
96 points from The Beverage Testing
Institute, quickly making Cuervo
Platino the #1 ultra premium silver.
“The Tequila boom has
been going so strong, for
so long. The education
challenge has been met really
well by the industry and we
feel there is real equity in the
words ‘100% agave’.”
-Larry Kass, Heaven Hill
Distilleries, Inc., discussing the
launch of Lunazul
“As consumers have become more
educated about spirits brands, they are
demanding higher-end products with solid
credentials and heritage. The addition of
Jose Cuervo Platino to our Tequila portfolio
meets consumers’ desires to trade up to new,
ultra–premium Tequila experiences,” says
Pedro Usuriaga, marketing manager, Jose
Cuervo International.
But not all blanco is creeping up in
price. One of the most exciting entries in the
100% agave category promises to be Lunazul,
a joint venture bringing together Heaven
Hill Distilleries, Inc. and Tierra de Agaves,
the Mexican spirits company founded by
Francisco Beckmann and sons, former coowner of Jose Cuervo. Upon its March rollout, Lunazul will retail for approximately
$20 for the blanco and $22 for the reposado,
making these 100% agave Tequila competitive
with mixto brands. “The Beckmann family
offers expertise and also a vertical integration
of their own estate-grown agave, that allows
them to trim costs and make this available
at an unprecedented price point,” says Larry
Kass, director of corporate communications,
Heaven Hill Distilleries, Inc.
Heaven Hill is hopeful that when
presented with an 100% agave product that
is near the price of mixto, consumers already
have much of the necessary knowledge to
seize the quality variety. “The Tequila boom
has been going so strong, for so long. The
education challenge has been met really well
by the industry and we feel there is real equity
in the words ‘100% agave,’” says Kass.
Heaven Hill will also be working with
Tierra de Agaves estate grown La Certeza
Tequilas. Priced around $40, $45 and $60 for
the various ages, Certeza is priced comparably
to many 100% agave brands, and will rely
on its ‘estate-grown’ and ‘family-owned’
Category focus
heritage as points of differentiation. “There
are many cubby holes for people to take
ownership in Tequila. And, you’re seeing real
movement to the extremes,” observes Kass.
1800 Select Silver Tequila, 100% agave
tequila from Proximo, is also breaking ground
in the super premium silver tequila category.
Following an unusual practice of blending a
touch of aged tequila to its double distilled
silver tequila, 1800 Select Silver provides
a product with additional character and
complexity while still offering a competitive
price point priced at $29.99. Proximo plans to
launch 1800 Select Silver Tequila this April
with a $8-million advertising campaign, and
according to according to Elwyn Gladstone,
director of marketing at Proximo, this is the
first of a series of planned “category firsts” for
the luxury Tequila brand.
Reposado ~ “Aged in
wood barrels or storage tanks
for between 2 and 11 months.”
Tucked neatly between blanco and añejo,
reposado struggles with being both the
answer to any taste, and the forgotten middle
child. According to Nielsen Scantrack and
Liquor Track, resposado sales are about equal
to blanco with 21% of total dollar sales,
while both far outpace añejo’s 7%, despite
aged Tequila’s higher price tag.
However, at least one reposado brand has
managed to outshine its siblings, ushering in
a moment of pride for the entire Tequila
category. At the 2007 San Francisco
World Spirits Competition, Milagro
Select Barrel Reserve Reposado not
only won a double-gold, but also toppled
369 other white spirits — including
vodkas, rums and gins — to take the
best in show among all white spirits.
The agave for Select Barrel Reposado is
estate-grown and baked in clay ovens,
like all Milagro, and then receives
three months of aging in new
French oak, contributing to its
complexity, and priced at about
$85.
“In white spirits, it’s all about
vodka, followed by rum, and for
Tequila to secure best in show, it shows
Tequila winning the hearts and minds of
consumers. It has been one of the top growth
categories for several years running and to
best the other white spirits shows that Tequila
continues to be relevant and exciting,” says
John Bilello, senior vice-president sales and
marketing, Tequila Milagro.
Although not as recognized as blanco or
añejo, reposado can offer a more complex
style of tequila at a price that many blanco
drinkers feel comfortable stepping up to.
One example, Sauza Reposado, still offers
100% blue agave quality with the added
quality of aging, allowing people to see the
difference between blanco and añejo without
paying for the high shelf price.
Añejo & Beyond ~
“Aged a minimum of one year in
barrels of no more than
600 liters”
What passes for añejo (aged) in the world
of Tequila, would be considered robbing
the cradle in Scotland, or even Bourbon
County for that matter. In fact, it’s the rare
Tequila that can endure for several years
in barrels in the heat of Mexico’s Jalisco
without succumbing entirely to the woody
flavors, making añejo an intriguing style for
connoisseurs of brown spirits.
Now in its 13th year, Jose Cuervo
Reserva de la Familia, easily identifiable in
its Mexican artist-designed box, is perhaps
the most iconic of the rare añejo Tequilas.
Among the attributes that excite spirits
enthusiasts are its select agave plants over
ten years of age, barrel program consisting
of French and American oak casks, and the
addition of reserve spirits up to 30 years of age.
Bottled in hand-blown glass bottles, dipped
in red wax and sealed with the family crest,
the $100 retail price of Reserva de la Familia
is beginning to look modest compared to its
peers.
When Henry Preiss, owner of Preiss
Imports, heard about 12 casks of old Tequila
aging in the cellars of Chinaco, he saw the
opportunity to explore a newly created
category segment: extra añejo was defined in
summer of 2006 for tequilas aged in small oak
barrels for a minimum of three years. Preiss
recounts that of the 12 casks, only 7 were
deemed worth bottling under the exclusive
label Chinaco Negro.
Patrón has found Tequila enthusiasts
similarly eager for its priciest entry, Gran
Patrón Burdeos, matured in a blend of
American and French oak barrels for a
minimum of 12 months, then distilled again
before it is racked in vintage Bordeaux
barrels, and finally priced at $499 retail. “We
made only 3,000 bottles the first year, so it
was very limited. It is mostly an on-premise
product and people are paying $75 to $120 a
shot in bars. We’re making 5,000 bottles this
year and expect to have no problem selling
every bottle we have,” says Carroll.
While the line of Don Eduardo Tequilas
includes a silver, añejo and reposado, brand
manager Rene Valdez says that as the
ultra-premium category gains momentum,
they’re starting to see a trend of highend restaurants serving tequila to sip
and enjoy: “As a result, the añejo
category has seen a 22% growth
this past year. As the new
tequila trend continues to go
upscale, the añejo category
should see a steady growth in
2008.” However, all three of
the line’s expressions garner
international accolades. “As
the innovators of the first triple
Category focus
ose Cuervo Ready For
Cinco De Mayo
As the Tequila category gears up for its summer sales
spike, José Cuervo launches its most aggressive—and
expensive—campaign yet.
W
hile Tequila is increasingly becoming a yearround beverage, there
is no denying that the category’s boom
months kick off with Cinco de Mayo
and last through mid-September (Mexican Independence Day).
In anticipation of the skyrocketing sales, category
leader José Cuervo is
launching a $25 million six-month campaign
which will combine PR,
media, sponsorship and
sampling in an effort to
draw attention to the entire Cuervo line-up.
“Our
summertime
approach for Cuervo will focus on
our most important
message:
‘José
Cuervo makes the
best
margarita,’”
says Toby Whitmoyer, brand director,
José Cuervo Portfolio, Diageo North
America. The campaign will combine
television advertising on national cable
networks, out-of-home media, a significant online component and local radio
in what amounts to the biggest media
spend ever for any
tequila brand. Cuervo
has teamed up with
Sandra Lee of Food
Network fame to promote the brand, and
will be a title sponsor
with The Association
of Volleyball Professionals. The sponsorship includes a
total of 18 events and runs all summer
long; and Cuervo is actually the title
sponsor of 3 events called The Cuervo
Gold Crowns, which will include a Celebrity Beach Challenge.
Says Whitmoyer, “We are betting
on growth from two areas: continuing
to strengthen our margarita platform,
as well as participating in the premiumization of the Tequila category.” The
brand’s two-fold approach includes onand off-premise activation around the
Cuervo Golden Margarita
Tour, which promotes the
signature Cuervo cocktail
made with Especial and
Grand Marnier.
The second thrust involves Cuervo’s luxury offerings; the new Platino
($59.99), an ultra-premium
silver which was launched
in September with a $6.5
million
campaign
and was rated “the
world’s best tasting
silver Tequila” by the
Beverage Tasting Institute; and the José
Cuervo Black Medallion, a super-premium añejo Tequila
aged in charred oak barrels.
Additionally, the brand’s renewed
focus on the Mexican-American consumer centers around the sponsorship
of the national Mexican soccer team, as
well as encouraging this demographic
to trade up to José Cuervo Traditional, a high-end offering that happens to be the number one selling
premium Tequila in Mexico. “We
want to repeat that success in
the U.S. and we see tremendous
opportunity in both the general
market as well as
with the MexicanAmerican consumer,”
says Whitmoyer. As
with all Diageo brand
promotions, the Cuervo
campaign will incorporate a
strong social responsibility
component.
distilled silver tequila, Don Eduardo Tequilas
offer consumers a new interpretation to this
category. Our unique packaging combined with
international recognition sets Don Eduardo apart
from other brands,” notes Valdez.
Another añejo tequila standing out for
original barrel aging is Familia Partida. Partida
uses gently washed one-pass Jack Daniel’s barrels
because, according to the group, they are superior
oak barrels that impart just a touch of sweetness to
the Partida Anejo. Elegante, also by Partida, is an
extra añejo Tequila aged more than 36 months in
American oak and is made from hand harvested
blue agave. According to Garry Shansby, founder
and CEO of Partida, 36 to 38 months is the perfect
amount of aging time for an extra añejo: “After
that point the oak takes over and you lose the
agave character.” Shansby remarked that many
people are amazed with the complexity the aging
imparts to the Tequila. “Everyone finds something
different, but many say that Elegante has a toffee
quality with light oak and spice flavors while
maintaining its agave qualities.”
Tequila packaging has moved beyond the
traditional and into the original. Patrón’s signature
bottle has become iconic and has even influenced
the style of its sister brands. Trago Tequila has taken
a more modern approach. Although the Tequila
inside is traditional 100% blue agave, owner Chris
Condon wasn’t interested in old world packaging.
Condon wanted something that would speak to a
younger generation and helped to develop their
contemporary bottle.
Tiki Tequila is known for its one-of-akind hand blown bottles, whose painstaking
blowing process allows for each consumer
to have their own original bottle–tiki
included–which are hand etched, wax
dipped, and signed. As the number
of high-end Tequilas increases in the
market, this may be the difference that
helps some stand apart.
Tequila may boast the number one
cocktail with the margarita, but that’s
not holding it back. This multi-faceted
spirit has proved it is no third-world
relic or niche product, but is actually
among the most innovative and nimble
categories of the moment. n