Tequila Bounces Back In U.S.–2011 Looks Very Promising

While category leader Jose Cuervo has struggled amid the economic downturn, Tequila has bounced back in the U.S. market after difficult years in 2008 and 2009. Propelled by double-digit growth from brands including Sauza, 1800 and El Jimador, Tequila’s top eight brands—which comprise nearly 85% of the category in the U.S. market—advanced by an aggregate 3.5% to more than 9 million cases in 2010.

Jose Cuervo, Tequila’s dominant player, has lost 3.3% in category share over the past two years, according to Impact Databank, but fared significantly better in 2010 than in 2009. U.S. marketer Diageo North America has unveiled a series of new initiatives to spur new growth. One focus has been Jose Cuervo Tradicional Silver, a 100% blue agave line extension launched nationally in February of this year. “Innovation has been a pillar of our success over the years, and thus far we’ve seen a very positive reaction to the rollout of Jose Cuervo Tradicional Silver,” says Amy-Lynn Bakshi, vice president, Jose Cuervo marketing at Diageo North America.

“After some challenging times, Tequila has come back strong in the U.S., and we’re doing even better than that,” says Amy Weisenbach, senior director of U.S. Tequila for Beam Global Spirits & Wine, whose Sauza brand advanced by 13.5% last year. Despite some challenging market conditions, Sauza has added more than 150,000 cases in annual sales since 2008.

Tequila is by far the market’s most upscale white spirits category, with an average retail price of around $18 per 750ml—nearly twice that of vodka, gin and rum. That positioning made the category especially vulnerable when the recession hit, particularly as U.S. spirits consumption saw a major shift from on- to off-premise. But Tequila brands that adapted to new market realities have achieved growth, despite their relatively high retail pricing. “Throughout the downturn, we continued to support bars, restaurants and hotels,” says John McDonnell, chief operating officer of The Patrón Spirits Co. “We also created programs to promote the off-premise, including mixability initiatives designed to educate consumers on how to make easy-to-prepare, high-quality cocktails at home. That remains a focus for us.”

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