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equila’s Top Dog The Multi-Faceted Category Continues to Grow TBy Jeffery Lindenmuth

equila may be tiny as spirit categories go, with sales of about 10.5 million 9-liter Tcases in 2007*, but like the tenacious Chihuahua this tiny Mexican purebred shows plenty of fight, exhibiting diversity and innovation that allows it to compete on almost any turf. From high- end bottle service to mixology beyond , Tequila is finding a place among the spirits elite.

While the popular “gold tequilas,” which are classified as mixto and typically contain the minimum 51% , still account for about 50% of Tequila sales in dollars, the greatest growth is occurring in the 100% agave brands which comprise nearly entirely of the super-premium portion of the category. Always marked with 100% agave on the bottle, these spirits represent the Tequila elite

*According to the Distilled Spirits Council of the United States Category focus

and may be classified as blanco, reposado But not all blanco is creeping up in or añejo according to their degree of aging. price. One of the most exciting entries in the Their growth has averaged about 80% over 100% agave category promises to be Lunazul, the past five years, compared to the overall a joint venture bringing together Heaven category’s 8.8%. “The Tequila boom has Hill Distilleries, Inc. and Tierra de , been going so strong, for the Mexican spirits company founded by “Un-aged or aged Francisco Beckmann and sons, former co- Blanco ~ so long. The education briefly in ” owner of . Upon its March roll- out, Lunazul will retail for approximately According to Nielsen Scantrack and challenge has been met really $20 for the blanco and $22 for the reposado, Track reports for the 52-week period ending making these 100% agave Tequila competitive May 2007, silver Tequila, which consists well by the industry and we with mixto brands. “The Beckmann family mainly of 100% agave blanco, accounted for feel there is real equity in the offers expertise and also a vertical integration 20% of total Tequila sales. Super-premium of their own estate-grown agave, that allows silver category leader Silver has ridden words ‘100% agave’.” them to trim costs and make this available the wave of Tequila knowledge and American at an unprecedented price point,” says Larry consumers’ growing acceptance of blanco -Larry Kass, Heaven Hill Kass, director of corporate communications, Tequila as they migrate away from “gold” Distilleries, Inc., discussing the Heaven Hill Distilleries, Inc. mixto. “When we launched in 1989, Añejo Heaven Hill is hopeful that when was our #1 seller,” says Matt Carroll, Patrón launch of Lunazul presented with an 100% agave product that chief marketing officer. “In the consumer’s is near the price of mixto, consumers already mind, they were supposed to be drinking have much of the necessary knowledge to gold-colored Tequila. As the brand grew, seize the quality variety. “The Tequila boom Silver passed Añejo, and Patrón Silver now has been going so strong, for so long. The outsells our Añejo and Reposado combined. “As consumers have become more education challenge has been met really well It has been the strongest seller thanks to its educated about spirits brands, they are by the industry and we feel there is real equity versatility and I don’t see that changing.” demanding higher-end products with solid in the words ‘100% agave,’” says Kass. While blanco does not require aging and credentials and heritage. The addition of Heaven Hill will also be working with is therefore usually the lowest-priced among Jose Cuervo Platino to our Tequila portfolio Tierra de Agaves estate grown La Certeza the three styles for any 100% agave brand, meets consumers’ desires to trade up to new, Tequilas. Priced around $40, $45 and $60 for it is not a one-dimensional category. “The ultra–premium Tequila experiences,” says the various ages, Certeza is priced comparably silver grade of Tequila has the largest share of Pedro Usuriaga, marketing manager, Jose to many 100% agave brands, and will rely the premium category for a few reasons: it is Cuervo International. on its ‘estate-grown’ and ‘family-owned’ the entry level, most mixable, least expensive Tequila and benefits from several well known brands which have transcended the category, and are recognized by non Tequila drinkers,” explained Richard Chianese from Trago Tequila, a super-premium producer focusing on high–end blanco, reposado, and añejo Tequilas. Other groups have also been responsible for getting blanco tequilas into the limelight. Jose Cuervo’s recently released Jose Cuervo Platino, priced at $60, has been written up in Vanity Fair, Portfolio, Men’s Vogue, GQ, Gotham, LA Confidential and Chicago Social and it has been validated with a score of 96 points from The Beverage Testing Institute, quickly making Cuervo Platino the #1 ultra premium silver. Category focus

heritage as points of differentiation. “There Tequila to secure best in show, it shows its Mexican artist-designed box, is perhaps are many cubby holes for people to take Tequila winning the hearts and minds of the most iconic of the rare añejo Tequilas. ownership in Tequila. And, you’re seeing real consumers. It has been one of the top growth Among the attributes that excite spirits movement to the extremes,” observes Kass. categories for several years running and to enthusiasts are its select agave plants over 1800 Select Silver Tequila, 100% agave best the other white spirits shows that Tequila ten years of age, program consisting tequila from Proximo, is also breaking ground continues to be relevant and exciting,” says of French and American casks, and the in the super premium silver tequila category. John Bilello, senior vice-president sales and addition of reserve spirits up to 30 years of age. Following an unusual practice of blending a marketing, Tequila Milagro. Bottled in hand-blown glass bottles, dipped touch of aged tequila to its double distilled Although not as recognized as blanco or in red wax and sealed with the family crest, silver tequila, 1800 Select Silver provides añejo, reposado can offer a more complex the $100 retail price of Reserva de la Familia a product with additional character and style of tequila at a price that many blanco is beginning to look modest compared to its complexity while still offering a competitive drinkers feel comfortable stepping up to. peers. price point priced at $29.99. Proximo plans to One example, Sauza Reposado, still offers When Henry Preiss, owner of Preiss launch 1800 Select Silver Tequila this April 100% quality with the added Imports, heard about 12 casks of old Tequila with a $8-million advertising campaign, and quality of aging, allowing people to see the aging in the cellars of Chinaco, he saw the according to according to Elwyn Gladstone, difference between blanco and añejo without opportunity to explore a newly created director of marketing at Proximo, this is the paying for the high shelf price. category segment: extra añejo was defined in first of a series of planned “category firsts” for summer of 2006 for tequilas aged in small oak the luxury Tequila brand. Añejo & Beyond ~ for a minimum of three years. Preiss “Aged a minimum of one year in recounts that of the 12 casks, only 7 were Reposado ~ “Aged in barrels of no more than deemed worth bottling under the exclusive wood barrels or storage tanks label Chinaco Negro. 600 liters” Patrón has found Tequila enthusiasts for between 2 and 11 months.” What passes for añejo (aged) in the world similarly eager for its priciest entry, Gran Tucked neatly between blanco and añejo, of Tequila, would be considered robbing Patrón Burdeos, matured in a blend of reposado struggles with being both the the cradle in Scotland, or even Bourbon American and French oak barrels for a answer to any taste, and the forgotten middle County for that matter. In fact, it’s the rare minimum of 12 months, then distilled again child. According to Nielsen Scantrack and Tequila that can endure for several years before it is racked in vintage Bordeaux Liquor Track, resposado sales are about equal in barrels in the heat of ’s barrels, and finally priced at $499 retail. “We to blanco with 21% of total dollar sales, without succumbing entirely to the woody made only 3,000 bottles the first year, so it while both far outpace añejo’s 7%, despite flavors, making añejo an intriguing style for was very limited. It is mostly an on-premise aged Tequila’s higher price tag. connoisseurs of brown spirits. product and people are paying $75 to $120 a However, at least one reposado brand has Now in its 13th year, Jose Cuervo shot in bars. We’re making 5,000 bottles this managed to outshine its siblings, ushering in Reserva de la Familia, easily identifiable in year and expect to have no problem selling a moment of pride for the entire Tequila every bottle we have,” says Carroll. category. At the 2007 San Francisco While the line of Don Eduardo Tequilas World Spirits Competition, Milagro includes a silver, añejo and reposado, brand Select Barrel Reserve Reposado not manager Rene Valdez says that as the only won a double-gold, but also toppled ultra-premium category gains momentum, 369 other white spirits — including they’re starting to see a trend of high- , rums and — to take the end restaurants serving tequila to sip best in show among all white spirits. and enjoy: “As a result, the añejo The agave for Select Barrel Reposado is category has seen a 22% growth estate-grown and baked in clay ovens, this past year. As the new like all Milagro, and then receives tequila trend continues to go three months of aging in new upscale, the añejo category French oak, contributing to its should see a steady growth in complexity, and priced at about 2008.” However, all three of $85. the line’s expressions garner “In white spirits, it’s all about international accolades. “As , followed by rum, and for the innovators of the first triple Category focus ose Cuervo Ready For Cinco De Mayo As the Tequila category gears up for its summer sales spike, José Cuervo launches its most aggressive—and

expensive—campaign yet. distilled silver tequila, Don Eduardo Tequilas offer consumers a new interpretation to this category. Our unique packaging combined with hile Tequila is increas- on growth from two areas: continuing international recognition sets Don Eduardo apart ingly becoming a year- to strengthen our platform, from other brands,” notes Valdez. round beverage, there as well as participating in the premi- W Another añejo tequila standing out for is no denying that the category’s boom umization of the Tequila category.” The original barrel aging is Familia Partida. Partida months kick off with Cinco de Mayo brand’s two-fold approach includes on- uses gently washed one-pass Jack Daniel’s barrels and last through mid-September (Mexi- and off-premise activation around the because, according to the group, they are superior can Independence Day). Cuervo Golden Margarita oak barrels that impart just a touch of sweetness to In anticipation of the sky- Tour, which promotes the the Partida Anejo. Elegante, also by Partida, is an rocketing sales, category signature Cuervo extra añejo Tequila aged more than 36 months in leader José Cuervo is made with Especial and American oak and is made from hand harvested launching a $25 mil- . blue agave. According to Garry Shansby, founder lion six-month campaign The second thrust in- and CEO of Partida, 36 to 38 months is the perfect which will combine PR, volves Cuervo’s luxury of- amount of aging time for an extra añejo: “After media, sponsorship and ferings; the new Platino that point the oak takes over and you lose the sampling in an effort to ($59.99), an ultra-premium agave character.” Shansby remarked that many draw attention to the en- silver which was launched people are amazed with the complexity the aging tire Cuervo line-up. in September with a $6.5 imparts to the Tequila. “Everyone finds something “Our summertime million campaign different, but many say that Elegante has a toffee approach for Cu- and was rated “the quality with light oak and spice flavors while ervo will focus on world’s best tasting maintaining its agave qualities.” our most important silver Tequila” by the Tequila packaging has moved beyond the message: ‘José Beverage Tasting In- traditional and into the original. Patrón’s signature Cuervo makes the stitute; and the José bottle has become iconic and has even influenced best margarita,’” Cuervo Black Medal- the style of its sister brands. Trago Tequila has taken says Toby Whitmoyer, brand director, lion, a super-premium añejo Tequila a more modern approach. Although the Tequila José Cuervo Portfolio, Diageo North aged in charred oak barrels. inside is traditional 100% blue agave, owner Chris America. The campaign will combine Additionally, the brand’s renewed Condon wasn’t interested in old world packaging. television advertising on national cable focus on the Mexican-American con- Condon wanted something that would speak to a networks, out-of-home media, a signifi- sumer centers around the sponsorship younger generation and helped to develop their cant online component and local radio of the national Mexican soccer team, as contemporary bottle. in what amounts to the biggest media well as encouraging this demographic Tiki Tequila is known for its one-of-a- spend ever for any to trade up to José Cuervo Tradi- kind hand blown bottles, whose painstaking tequila brand. Cuervo tional, a high-end offering that hap- blowing process allows for each consumer has teamed up with pens to be the number one selling to have their own original bottle–tiki Sandra Lee of Food premium Tequila in Mexico. “We included–which are hand etched, wax Network fame to pro- want to repeat that success in dipped, and signed. As the number mote the brand, and the U.S. and we see tremendous of high-end Tequilas increases in the will be a title sponsor opportunity in both the general market, this may be the difference that with The Association market as well as helps some stand apart. of Volleyball Profes- with the Mexican- Tequila may boast the number one sionals. The sponsorship includes a American consumer,” cocktail with the margarita, but that’s total of 18 events and runs all summer says Whitmoyer. As not holding it back. This multi-faceted long; and Cuervo is actually the title with all Diageo brand spirit has proved it is no third-world sponsor of 3 events called The Cuervo promotions, the Cuervo relic or niche product, but is actually Gold Crowns, which will include a Ce- campaign will incorporate a among the most innovative and nimble lebrity Beach Challenge. strong social responsibility categories of the moment. n Says Whitmoyer, “We are betting component.