Southern Glazer’s Take On Tequila’s Fastest-Growing Segment

The $25-$40 price tier of Tequila has emerged as the category’s growth engine, with the top seven brands in the segment combining for 11% growth in control states year-to-date.

As the largest spirits and wine wholesaler in the U.S., Southern Glazer’s has a unique window into national consumption trends, which show a strong connection to Tequilas at $25-$40 among millennials, males, and multicultural consumers. SND executive editor Daniel Marsteller caught up with Zach Poelma, SVP of Strategy & Insights Center of Excellence at Southern Glazer’s, for more detail on what’s driving the fast-growing segment.

SND: What are the key factors behind the faster growth of $25-$40 Tequilas compared with other price segments?

Poelma: $25-$40 Tequila has benefited from both consumers trading up from lower-priced mixtos to 100% blue agave, as well as trading down from some consumers that are under financial pressure. With continued signs of consumer trade down across most spirits categories, including Tequila, the $25-$30 price tier has benefited, as consumers return to mid-premium price tiers after trading up to ultra and luxury price tiers during the pandemic and post-pandemic period.

Accelerated growth for Tequilas priced between $25 and $40 is largely driven by Reposado, which has gained +5 points in 9-liter volume share since 2019 and +3 points versus last year, mainly at the expense of Blanco at that price point. Additionally, growth in this segment is being fueled by a mix of established brands, innovation, and celebrity-backed Tequila brands.

SND: What demographics are driving Tequila in the $25-$40 area?

Poelma: Relative to total spirits and total Tequila shoppers at all price points, the $25-$40 Tequila market is particularly popular among millennials, males, Black, and Hispanic shoppers. These shoppers are predominantly located in the Pacific, Mountain, and West South-Central regions. This price tier is also popular with higher-income consumers relative to other spirits classes.

SND: How are you seeing the segment’s growth develop in the on-premise and off-premise respectively?

Poelma: Over the last year, we’ve observed that most of the Tequila growth at all price points has been driven by the off-premise, with both dollars and volume up low single-digits, while in the on-premise, trends have softened to low single-digit growth versus last year. While the on-premise has softened, Tequila in this price tier remains one of the strongest segments.

For Tequila at $25-$40 specifically, the off-premise currently accounts for 80% of the volume share, and we’ve seen growth within the grocery channel, which grew an average five items per account versus last year.

Additionally, we’ve seen accounts sold penetration in the on-premise grow by +14 points in the last year relative to 2019 levels, reaching 64% of the total Tequila universe. However, since Tequila at $25-$40 currently under-indexes in the on-premise relative to other price points, we see an opportunity in key subchannels such as Recreation and Bar & Nightclub.

SND: What types of serves are driving Tequila consumption in the U.S.?

Poelma: In the on-premise we’re seeing menus where in the past they may have only had a Margarita on the cocktail list, now have 2-3 drinks with a Tequila option and often featuring Tequilas priced in the $25-$40 retail range. Additionally, Technomic recently reported a significant rise in Tequila mentions on menus, now hovering around 3,300, which is a 10% increase since 2019. Tequila is now featured in about 78% of on-premise operators, which marks a +2.6-point rise since 2019 and around a +1-point increase compared to last year. This growth surpasses all other core spirit categories.

From a consumer standpoint, Datassential reported that nearly half of Tequila drinkers enjoyed it in a cocktail on their last occasion, with a third opting for Tequila shots. Among those who preferred cocktails, popular choices included the Margarita, Paloma, or Tequila Sunrise. Gen Z and millennials have the highest consumption rates of Tequila shots, consistent with general spirits consumption habits.

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