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Led By Patrón, Luxury Tequila Soars In The U.S.

May 17, 2018

The U.S. market’s luxury Tequila segment continues to surge to new heights. Luxury Tequila (above $40 a 750-ml.) increased by 11.5% to nearly 3.7 million cases last year, led by Patrón, whose volume rose by 7.5% to 2.5 million cases. Earlier this year, Bacardi Ltd. acquired full control of the Patrón franchise in a deal valuing the company at $5.1 billion. The acquisition will significantly boost Bacardi’s bottom line, with Bacardi North America regional president Pete Carr recently estimating that Patrón now accounts for around 27% of the portfolio by value, ahead of Grey Goose’s 26% share and Bacardi rum’s 22% share. The transaction lifts Bacardi’s U.S. market share by value from fifth place to second place, behind only Diageo, Carr added.

Though Patrón accounts for nearly 70% of the above-$40 sector in the U.S. market, several ambitious players are looking to challenge its dominance. Diageo, with its fast-growing Don Julio and Casamigos brands, is aiming for expansion. Don Julio, which retails at around $50 for its Blanco and up into the hundreds of dollars for its top-end Real Extra Añejo, has carved out strong gains lately, climbing more than 28% to nearly 540,000 cases last year to earn Impact “Hot Brand” honors. Diageo is also bullish on Casamigos, which joined the portfolio last June in a deal worth $700 million, and potentially $1 billion if certain growth criteria are met. Launched by actor George Clooney and entrepreneurs Rande Gerber and Mike Meldman in 2013, Casamigos grew by more than 54% last year, reaching 170,000 cases. The brand—which includes Blanco, Reposado, and Añejo expressions ($45-$55)—is looking to build on its success with the launch of a mezcal offshoot this spring. “The original management is still operating Casamigos as a separate unit, and we expect that to continue for the foreseeable future,” says Diageo North America president Deirdre Mahlan. “We want to have as little disruption as possible given the incredible trajectory of the brand.”

Pernod Ricard also is making a play in the luxury Tequila space with its Avión brand. Pernod purchased a majority stake in Avión in 2014, acquiring the remaining shares earlier this year. Like Casamigos, Avión has benefited from its celebrity connections, most recently with a partnership with recording artist Jeezy. Avión’s core lineup, which retails at around $40-$60, rose 3.9% to 120,000 cases last year.

Brown-Forman-owned Herradura, meanwhile, was up 13% to 179,000 cases last year, and is seeing particularly fast growth for its Herradura Ultra label ($60). Ultra is a Cristalino Tequila style—a clear Extra Añejo aged for up to 49 months in American white oak. The expression, which launched in select U.S. markets in 2015, is set to expand nationwide this summer. “There’s a lot of interest in a clear spirit that has an aged taste profile. It’s such a new concept, and people are definitely willing to trade up for that quality and additional nuance in the product,” says senior brand manager Jennifer Simmonds.

Other brands looking to stake their claim in the upscale reaches of the Tequila category are Moët Hennessy’s Volcan de mi Tierra and Stoli Group’s newly launched Cenote. A joint venture between Moët Hennessy and the Gallardo family, Volcan de mi Tierra includes a Blanco ($40) and a Cristalino ($60) and is initially focusing on the on-premise in key urban markets. Cenote, which Stoli rolled out in March, features Blanco ($45), Reposado ($55), and Añejo ($65) expressions aged in American oak Bourbon barrels. —Christina Jelski

U.S. – Top Five Luxury-Priced Tequila Brands1
(thousands of nine-liter case depletions)
Rank Brand Importer 2016 2017 Percent
Change4
1 Patron2 Patron Spirits (Bacardi) 2,321 2,498 7.6%
2 Don Julio Diageo 420 539 28.4
3 Herradura Brown-Forman 158 179 13.3
4 Casamigos Diageo 110 170 54.5
5 Avion Pernod Ricard 116 120 3.9
Total Top Five3 3,124 3,506 12.2
Total Luxury Tequila 3,315 3,695 11.5%
1 over $40 per 750ml
2 includes Roca
3 addition of columns may not agree due to rounding
4 based on unrounded data

Source: IMPACT DATABANK

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