Despite supply not meeting demand, Tequila and mezcal continue accelerating sales growth at breakneck speed. “We aren’t even close to meeting demand in the ultra-premiums,” says Jason Schneider, general manager and spirits buyer at Bottle Barn in Santa Rosa, California. “Certain brands are seeing long period outages, but customers are exploring new options, so we aren’t necessarily losing sales.”
Tequila’s growth is outpacing Bourbon and rum in the United States and will pass them if trends continue. In 2020, Tequila jumped 13.5% to 21.27 million nine-liter cases, while Bourbon increased 5.5% to 25.9 million cases and rum grew 3.8% to 23.25 million cases, according to Impact Databank. Meanwhile, mezcal advanced 7% to 400,000 cases.
Retailers are adjusting shelf space for Tequila as Covid-related supply chain issues and bottle shortages for some producers are corrected. Bottle Barn carries more than 400 agave-based spirits SKUs, comprising 80% Tequila and 20% mezcal. The retailer’s Tequila sales have increased 25% this year. Popular brands include Hornitos ($19 a 750-ml.), Casamigos Blanco ($45), and Teremana Reposado ($30). “The sweet spot is $20 on the low-end, $40 on the higher-end, and $125 for ultra-premium,” Schneider says. “Customers are interested in ultra-premium extra añejo offerings retailing at more than $100 a 750-ml.”
Mezcal brands leading the charge at Bottle Barn include Yuu Baal ($34 a 750-ml.), Fidencio ($35), and Bozal Borrego ($80). “The sweet spot is $30-$50 and $110 at the high end,” Schneider says. “Our customers are stretching out to other agave products like Bacanora and Sotol.”
At the 58-unit WB Liquors & Wine chain in Texas, Tequila sales are up 11% in 2021 and mezcal has increased 31%. Tequila accounts for 18% of the store’s spirits sales, compared to vodka’s 18.8% share. “Premiumization continues to be the significant Tequila purchase trend,” says WB Liquors president and CEO John Hermann. “The influx of celebrity interest in Tequila will help build on its recent rise.”
WB carries 107 Tequila brands and 308 SKUs and 26 mezcal brands and 39 SKUs. Top-selling brands include Patrón Silver ($49 a 750-ml.), Hornitos ($49 a 1.75-liter), and Don Julio 1942 ($140 a 750-ml.). “We’re still experiencing out-of-stock across the board in silver, reposado and añejo, and there are multiple brands on monthly allocations,” Hermann says.
In North Dakota, the five Happy Harry’s Bottle Shops have seen Tequila sales rise 18% and mezcal advance 59% this year. “Those percentages would be larger had we not been out of stock on several packages throughout the last 12 months,” says CEO Dustin Mitzel. “Tequila has firmly planted itself as a growing category in our stores. With the strength of the ready-to-drink cocktails with Tequila, it will continue to grow.” The stores have made significant changes to accommodate demand. “We have expanded our space and selections to adjust to trends we are seeing,” Mitzel explains. “When we make these adjustments, we’re preparing for long-term shifts.”
Happy Harry’s carries about 125 Tequila brands and six to 10 mezcal brands. Leading Tequila brands at Happy Harry’s are Patrón Silver ($36 a 750-ml.), Don Julio Blanco ($45), Teremana ($28) and Casamigos Blanco ($45). “The sweet spot is $25-$50,” Mitzel says. “Tequila’s growth percentage is right up there with Bourbon, but mezcal is still underdeveloped in our market.”
Indeed, Tequila is cruising in the passing lane. “Tequila will continue growing above other key categories and gain share as stock levels adjust in Texas, while mezcal will benefit from the consumer demand for agave-based spirits,” Hermann says. “As the economy changes the level of premiumization may adjust, but there is only category upside.”