2016 Market Watch Spirits Brand Of The Year: Tito’s Handmade Vodka

In a category that has seen its share of stars over the years, the craft-oriented brand has shown record-breaking growth.

Few spirits have equaled the remarkable growth achieved by Tito’s Handmade vodka. The craft brand is poised to continue rising.
Few spirits have equaled the remarkable growth achieved by Tito’s Handmade vodka. The craft brand is poised to continue rising.

Vodka is still America’s favorite spirit, but in recent years the category has struggled as younger drinkers gravitate toward whiskies, craft beer and wine. But one brand has defied that trend and shown some of the most torrid growth the category has ever seen: Tito’s Handmade vodka. Texas native Bert Butler “Tito” Beveridge founded Fifth Generation Inc. in Austin, Texas, in 1997 and produced just 1,000 cases of Tito’s vodka in the first year. By 2006, the brand was at 150,000 cases, and its momentum has kept on rolling. From 2006 to 2015, Tito’s has had an average annual compound growth rate of 38.3 percent, and its volume hit 2.78 million cases last year, according to Impact Databank. Tito’s has netted Impact “Hot Brand” honors for eight years running, and Impact Databank projects that the brand will reach 3.65 million cases in 2016.

Even as competitors added flavor after flavor to their vodka portfolios in the early 2000s, Tito’s stuck with its single unflavored, corn-based product, and Beveridge has no plans for line extensions. The vodka’s bottle and brown-paper label haven’t changed much since its inception and reinforce the brand’s craft origins and messaging. That simplicity, however, belies Tito’s premium-plus price point of $20 to $25 a 750-ml. bottle—a tier typically occupied by upscale imports. In fact, Tito’s is currently the only domestic player in the $15-to-$25 vodka segment’s top five rankings, according to Impact Databank.

But success hasn’t come without complications. Starting in 2014, Fifth Generation faced class-action lawsuits in Florida and California challenging its use of the word “Handmade” on Tito’s label. The plaintiffs alleged that Tito’s purchases bulk neutral grain spirit and rectifies it in industrial column stills, while Beveridge defended the company’s long-standing practice of crafting the vodka in batches using old-fashioned pot stills. Fifth Generation emerged victorious last May when the court cases were dismissed, and it’s expected that Tito’s labeling will remain the same. Consumers didn’t seem to notice the kerfuffle, as the brand’s growth continued apace. After surging 55 percent in 2014, Tito’s rose 40.5 percent in 2015. This year, it’s up 61.5 percent in IRI channels through the 32 weeks ending August 7th. Impact ranked Tito’s at No.-16 in its top 25 spirits brands by volume in 2015, projecting that the vodka will enter the top 10 within the next two years.

Much of Tito’s success lies with a strong millennial following, and the brand supports its craft messaging through festival sponsorships. This summer, the Tito’s Airstream Stardust Lounge road-tripped along Route 66 to promote the brand and raise money for the nonprofit organization Paws for Veterans. In addition, Tito’s bills itself as “Vodka for Dog People” and donates proceeds from the sale of branded accessories to Emancipet, an organization that provides veterinary care to stray animals.

Although the idea of craft vodka from Texas may have seemed odd 20 years ago, the recent success of another Austin-based vodka brand shows how much of an impact Tito’s has had. Deep Eddy vodka was founded in 2010 and bought by Heaven Hill Spirits last year for an estimated $400 million. The fast-rising brand is showing strong growth, while its flavor portfolio and nostalgia-focused message differentiate it from Tito’s. But neither Deep Eddy nor any other vodka currently comes close to the stellar heights Tito’s has achieved.