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Exclusive: Tequila’s Rise Driven By 100%-Agave Entries While Cuervo Struggles

May 21, 2014

Driven by the continuing expansion of the 100%-agave segment, the U.S. Tequila market continues to carve out solid growth. U.S. Tequila depletions rose by 3.5% to 13.45 million cases in 2013, according to Impact Databank, and the category has tacked on nearly 2 million additional cases in annual sales since 2010. However, much as the U.S. Scotch market has been a dichotomy of late, with the upscale single malt segment rising while blends struggle to achieve growth, the U.S. Tequila market’s growth trends have created a sharp divide, with 100%-agave entries generally thriving while mixto Tequila (which requires no more than 51% blue agave in its composition) has seen its share eroded.

Five 100%-agave brands in particular have driven the segment’s impressive upswing: Patrón, 1800, Camarena, Sauza Hornitos and Don Julio. This quintet accounted for just over 30% of U.S. category volume in 2013, and the vast majority of market growth, as it achieved an aggregate rise of more than 15%. Another leading 100%-agave entry, Bacardi’s Cazadores, has returned to growth of late after its rise was thwarted by the economic downturn, while Brown-Forman’s El Jimador has enjoyed solid progress in the U.S. after shifting from a mixto brand to a 100%-agave formula a few years ago. Meanwhile, an array of upstarts is also achieving significant growth from their small bases, such as Proximo’s Zarco, Campari America’s Espolón, Heaven Hill’s Lunazul and the Pernod Ricard USA duo of Avión and Altos.

The 100%-agave segment is also benefiting from celebrity cachet, with bold-face names joining forces with leading spirits marketers to create upscale offerings. Justin Timberlake has partnered with Beam on Sauza 901 ($30), while Sidney Frank Importing Co. announced earlier this year that it had acquired exclusive rights to market Casamigos, the upscale Tequila ($45-$55) developed in 2013 by George Clooney and Rande Gerber. Casamigos was previously handled by Serralles USA. Meanwhile, Diageo kicked off 2014 by forming a joint venture with Sean “Diddy” Combs to acquire luxury Tequila entry DeLeón. Combs—who has, in conjunction with Diageo, built Cîroc into one of the U.S. market’s biggest imported vodka brands—is now the face of DeLeón, which sold around 10,000 cases last year. DeLeón’s five variants range from $120 to more than $1,000 per bottle.

Proximo Spirits, which began handling Jose Cuervo nearly a year ago, is trying to leverage a little star power of its own. Last summer, Proximo tapped actor Kiefer Sutherland to front Cuervo in its new “Have a Story” ad campaign. Whether Sutherland can help reverse Cuervo’s fortunes remains to be seen, but the brand is surely in need of a turnaround. Tequila’s top seller has lost nearly a quarter-million cases in annual U.S. depletions since 2010. Proximo, which is controlled by Grupo Tequila Cuervo, is now putting more emphasis behind the 100%-agave Jose Cuervo Tradicional, and has also tried to shake things up by adding flavor. Late last year, Proximo unveiled Jose Cuervo Cinge, a cinnamon-infused silver Tequila. The rollout was supported by a $10 million media spend, which initially launched via social media platforms before shifting into a national campaign.

Impact’s exclusive report on the Tequila category appears in the May 15 edition.

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