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Tequila’s Growth Trend Rolls On, Lifting Value And Volume

May 22, 2017

Tequila has been on an enviable rise over the past decade, with shipments to the U.S. market jumping 86% since 2005, to nearly 18 million cases. While a host of other global markets are also showing dynamic growth for Tequila, the U.S. continues to be the main driver, accounting for 82% of exports.

For years, mixto Tequilas (at least 51% agave and 49% neutral spirit) were the norm in the U.S. as elsewhere. But over the past two decades, the presence of 100% agave Tequila has soared. Last year the tipping point came, as 100% agave’s share of the U.S. market finally passed the 50% threshold, according to Impact Databank, to account for 50.3% of total U.S. Tequila imports.

“Exports of standard (mixto) Tequila to the U.S. are flat, while 100% agave Tequila is growing at nearly double-digits,” notes Luis Velasco Fernandez, president of the Camara Nacional De La Industria Tequilera and proprietor of Mexican drinks importer and Tequila producer La Madrilena. “That appears to be a trend that won’t stop anytime soon.”

For U.S. suppliers, this trend has been a boon to the bottom line. According to the Economic and Strategic Analysis Department at the Distilled Spirits Council, gross U.S. supplier revenues of Tequila (including FET) have risen by nearly 160% since 2003, when they stood at $962 million. Last year, that number reached nearly $2.5 billion.

Behind those numbers is a strong tide of premiumization. While Tequila’s overall growth in the U.S. has been impressive—with shipments expanding by nearly 3.8 million cases since 2012—the high end is clearly propelling much of its progress. According to Impact Databank, the $40-and-above segment now accounts for 21% of the category, up from 13% a decade ago, when the total pie was significantly smaller.

The top 25 Tequila brands in the U.S. market grew an aggregate 7% in 2016, according to Impact Databank, with only three labels posting a decline for the year. Meanwhile, 10 of the top 25 brands enjoyed double-digit growth last year. Seven of those 10 double-digit gainers were at $25 and above, with the remaining three in the $15-$25 tier.

In fact, the dominant luxury segment leader Patrón (+10% to 2.3 million cases) showed some of the strongest progress in the entire category last year, while fellow ultra-premium labels Don Julio (Diageo) and Herradura (Brown-Forman) were up 23% to 375,000 cases and 13% to 158,000 cases respectively. One step lower on the pricing ladder ($25-$40), brands like Milagro (William Grant), Espolón (Campari America), Olmeca Altos (Pernod Ricard) and Corralejo (Infinium Spirits) were all up by double digits as well.

Not to be left out, premium labels like Jose Cuervo (+4% to 3.6 million cases) and Sauza (+7% to 2.3 million cases) have been expanding their franchises at upscale price points lately, Cuervo with its Tradicional Silver offering in particular, and Sauza with its Hornitos and Blue expressions, which retail at about $5 more than the core brand.

For a full report on the U.S. Tequila market, see Impact’s May 15 issue.

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