Premiumization has long been a buzzword in the spirits industry, and right now the category spearheading that trend is Tequila. According to Impact Databank, most of the top premium, super-premium, and luxury-priced Tequila brands grew in 2020, while all of the top sub-premium labels suffered. Jose Cuervo, the No.-1 Tequila in the United States, increased 21.5% to 4.7 9-liter million cases last year, and its portfoliomate, the No.-3 brand 1800, advanced 31.2% to 1.5 million cases. The No.-2 Tequila, Patrón, jumped 25.2% to 2.7 million cases, and No.-4 Hornitos rose 11.7% to roughly 1.1 million cases. Rounding out the top five is Diageo’s Don Julio, which saw a 24.5% surge to about 1.1 million cases as well. Overall, Tequila depleted 20.7 million cases in the U.S. market last year, an increase of 13.5%, according to Impact Databank.
As was the case with other categories, Tequila consumption in 2020 shifted significantly from the on-premise to the off-premise, with the closing of many bars and restaurants across the world due to the Covid-19 crisis. “We saw unprecedented growth in the e-commerce space—our digital commerce business grew five-fold from the previous year,” says Chloe Lloyd-Jones, vice president of marketing for North America at Patrón. “And in the last five years, the Tequila category has seen 41% growth, according to Impact Databank.”
Patrón connected last year with campaigns like “Cinco Simply,” an Instagram Live campaign that featured more than 20 bartenders demonstrating how to honor Cinco de Mayo simply at home. The events raised money for the hospitality industry. “We showed up to support all the bartenders and restaurant owners that supported us over the years,” Lloyd-Jones adds.
This year, Patrón has unveiled the Patrón X JonBoy Margarita Collection Kit in collaboration with the celebrity tattoo artist for consumers to create their own Cinco de Mayo celebrations. “As we continued to see demand for at-home cocktails, combined with e-commerce shopping, there was an opportunity for us to bring a customizable experience right to our audience’s doorstep,” Lloyd-Jones says.
Beam Suntory-owned Hornitos also partnered with a celebrity tattoo artist in 2020, teaming up with Dr. Woo to help launch his skincare line as part of multi-year platform “The Shot Fund.” This coincides with Hornitos’ “A Shot Worth Taking” campaign that was inspired by the brand’s history of being enjoyed as a shot. It also aims to empower and support creative entrepreneurs like photographer Paul Octavious, whose Black Archivist program provides cameras to Black artists. “Channeling Hornitos helped us navigate the changing circumstances, while supporting our partners who were striving to do the same,” says Beth Krigel, senior marketing director for U.S. & Global Tequila at Beam Suntory.
Hornitos also maintained its relationships with the on-premise by developing cocktails-to-go programming. Krigel notes that mixologists adapted Hornitos-based Margaritas into their carryout formats. The brand has continued to build upon 2020’s off-premise surge with the introduction of Hornitos Tequila Seltzer, a new range of RTD cocktails made with Hornitos Plata that debuted in March. The 5% abv RTDs are currently available in Mango and Lime flavors and sell for $12 a 4-pack of 12-ounce cans. Hornitos also recently unveiled a line of premixed Margaritas ($22 a 1.75-liter), made with Plata Tequila, in Lime & Hibiscus, Strawberry Tamarind, and Pineapple Poblano expressions. “The rise of at-home cocktail occasions in the last year has only served to fast-track the trends that were already driving momentum behind the RTD category,” Krigel says.
Quality Equals Quantity
While convenience has been playing a larger role lately, consumers haven’t been skimping on quality, and brands like Don Julio have benefited from the move upscale. “As the Tequila category continues to grow, people are educating themselves and realizing that Tequila is one of the world’s most complex spirits,” says Christina Choi, senior vice president of Tequila for Diageo North America.
To highlight its history of innovation, Don Julio launched its largest marketing effort to-date in October 2020: a new global advertising campaign that honors the legacy of founder Don Julio González and his “Principles of Devotion” to the Tequila-making process. “We placed even more focus on leveraging our rich heritage to educate consumers and enable them to find moments of celebration,” Choi says. The brand worked with bartenders on custom recipes, partnered with influencers to showcase easy-to-make cocktails, and developed cocktail kits that allowed consumers to bring the mixology experience home.
At the same time, Don Julio supported the on-premise by donating to organizations like the Restaurant Workers’ Community Foundation and No Us Without You LA. This year’s Cinco de Mayo campaign encouraged consumers to patronize their favorite restaurants and bars by giving away $125,000 worth of “Don Julio Cincos,” vouchers that can be redeemed for $5 to spend at local establishments. In addition, the newly launched Tequila Don Julio Fund is committing $1 million in aid to hospitality industry charities over the next four years. “We’re excited to continue supporting our extended familia in communities who have always supported Don Julio and helped the brand grow into the spirit it is today,” Choi says.
Meanwhile, Campari-owned Espolòn is a shining star at the super-premium tier. The No.-6 Tequila brand in the United States leapt 50.6% to 768,000 cases last year, and it was the No.-2 Tequila on Drizly between spring of 2020 and spring of 2021, according to Campari Group senior marketing director Bernadette Knight. To encourage experimentation, Espolòn launched its Blanco and Reposado expressions in 375-ml. bottle replicas of the 750-ml. bottle (both $16). “This size is perfect for trial and highly giftable,” Knight notes. In addition, the brand developed stronger relationships with its e-commerce partners and created “Ramon’s Bar,” an interactive digital experience where consumers can order from a virtual bartender and watch their drink be made so they can recreate it themselves.
“One major trend we’ve noticed in recent years is the evolution of how Americans are drinking Tequila,” Knight adds. “Tequila has traditionally been consumed in a Margarita or as a shot, but consumers are now discovering its versatility, and they’re experimenting with it in a wide variety of cocktails, as well as sipping it neat or on the rocks.”
Another super-premium brand making a splash lately is newcomer Teremana, founded by Dwayne “The Rock” Johnson. Distributed by Mast-Jägermeister, Teremana hit the U.S. with a Blanco ($30 a 750-ml.) and a Reposado ($33) in March 2020, right as the world was heading into lockdown. “We were fortunate to have Dwayne’s passion for Teremana and his social media presence to connect with consumers,” says Teremana co-founder Jenna Fagnan. “He’s the most followed American man in the world, so his connection with people was our only marketing tool for the first six months, and Teremana became the second-most followed brand in the spirits industry in under a year.”
This approach seems to have worked: Teremana reached over 400,000 9-liter case shipments in its first 12 months, according to Fagnan. “The reorder rate has been incredible as consumers have tried and loved the product,” she adds. “Quality underpins everything we do. Consumers today want to know more about where their spirits come from and care about what they’re putting in their bodies. We’re the first Tequila to put our nutritional facts on the back label.”
With the world now opening up, Teremana is focusing on the on-premise, increasing distribution and ramping up education. The brand also plans to add an Añejo variant by the end of this year. In an effort to support local restaurants and bars, the brand ran a promotion for Cinco de Mayo called “Guac on The Rock,” which reimbursed consumers for their guacamole at a restaurant if they also purchased a Teremana cocktail. “The hospitality industry is so important to our economy and we want to encourage everyone to get back out there,” Fagnan says.
Santo Spirit is a celebrity-backed brand that’s been gaining traction in recent years as well. Co-founded by musician and former Cabo Wabo Tequila owner Sammy Hagar in 2017, Santo initially introduced its Mezquila offering ($55 a 750-ml.), which is the world’s first Tequila-mezcal hybrid distilled from a combination of Blue Weber and Espadín agaves. In 2019, Hagar teamed up with star chef Guy Fieri to launch a 100% Blue Weber agave Blanco Tequila ($35), and they added a Reposado expression ($45) this past February. An Añejo is slated to launch in late fall and will be priced between the Reposado and the Mezquila.
“We’ve been highly successful in a short period of time, and because of the pandemic, retail business has picked up tremendously,” says Santo Spirit co-founder Jack Daniels, who launched the wine marketing company Wilson Daniels with Win Wilson in 1978. “And now that the restaurants are starting to open up again, there’s a whole new breed of people because every brand is coming out with some wonderful cocktail recipes, and that’s expanding the audience.”
Other celebrity-backed Tequila brands include George Clooney and Rande Gerber’s Casamigos Tequila—now owned by Diageo— which has risen in the ranks to become the No.-9 Tequila in the U.S., reaching 600,000 cases last year, according to Impact Databank. There’s also Cincoro Tequila— which was launched in late 2019 by NBA superstar Michael Jordan, along with Jeanie Buss of the Los Angeles Lakers, Emilia Fazzalari and Wyc Grousbeck of the Boston Celtics, and Wes Edens of the Milwaukee Bucks—and Villa One, an ultra-premium offering founded by Nick Jonas and John Varvatos and made by master distiller Arturo Fuentes. Like Cincoro, Villa One also launched in 2019.
With the return of in-person dining, drinks sales are rebounding. At On The Border Mexican Grill & Cantina, a 150-unit Irving, Texas-based chain with locations throughout the United States, bar revenue is quickly getting back to its $50 million pre-pandemic level, with the help of to-go cocktails, happy hour specials, and a range of Margarita offerings. “Of the $50 million in bar sales, 67% comes from Tequila-based drinks,” notes CMO Edithann Ramey.
Margaritas, of course, are On The Border’s bread and butter, and the company offered Margaritas to-go in all flavors and at every price tier wherever legal. “On Cinco de Mayo this year, we sold a lot of margaritas—53,910 to be exact–a 33% increase over Cinco 2019,” she notes. The chain’s three most popular Tequila cocktails ($6-$10) are the House Margarita, the Frozen Strawberry Margarita, and the Borderita, made with Lunazul Reposado Tequila, Gran Gala orange liqueur, and a house-made citrus mix, while the three top-selling Tequila brands are Lunazul Reposado, Patrón Silver, and 1800 Reposado. The chain also plans to roll out premium Margaritas made with high-end Tequila and a build-your-own Margarita bar.
In the Chicago suburbs, the Bien Trucha Group operates four upscale restaurant concepts, including Bien Trucha, A Toda Madre, Quiubo, and Santo Cielo, along with the ghost kitchen Lil Donkeys. All except Santo Cielo serve Mexican cuisine, so Tequila is prominent on the drinks menus. One of the most popular cocktails across the board is the Ahuacatl ($13), aka the Avocado Margarita, made with Exotico Blanco Tequila, Juarez triple sec, avocado purée, lime juice, a mist of Petunia mezcal, and a cilantro garnish. “That drink is pretty unique to us, and people will come back specifically for that cocktail,” says Bien Trucha Group beverage director Patrick Timmis.
Two other Tequila cocktails that sell well at Bien Trucha Group’s restaurants include the Spicy Pepino ($14), which combines habanero-infused Exotico Blanco, triple sec, fresh muddled cucumber, lime, and tajin spice, and La Melona ($13), which features G4 Blanco Tequila, Ælred Melon aperitif, fresh cantaloupe, lime, and tajin. “G4 is one of our favorite Blanco Tequilas to use in cocktails and just for sipping as well,” Timmis notes.
Bien Trucha Group stocks 40-60 SKUs of Tequila, spanning 10-12 brands, at each restaurant. “We like to support those brands that are honest and transparent about how they’re making their product,” Timmis explains. “So you won’t find a lot of big-name brands on the back bar, but they’re brands that we can confidently stand behind. We have close personal relationships with a lot of these producers and it really gets our staff excited about what we have.”
Big Star is another Chicago area restaurant doing a big Tequila business, but when Covid-19 hit, the venue saw a new opportunity for its famous Margarita ($12), which mixes Corazón Blanco Tequila, Marie Brizard Orange Curaçao, Gran Gala orange liqueur, and fresh lime juice. The restaurant’s operator One Off Hospitality was already working with former employee Robby Haynes, founder of Apologue Spirited Liqueurs, to develop a canned version of the Margarita, and since most of Apologue’s revenue came from the on-premise, Haynes had more time on his hands to work on the project during the pandemic. “By mid-to-late summer 2020, we had the Big Star Margarita on the shelf, and the response was really positive,” he recalls. “We’re available at Whole Foods, Target, Binny’s, Foxtrot, and a couple other markets in Chicago—just really trying to focus on the city and the surrounding suburbs.” The product ($20 a 4-pack of 12-ounce cans) also has very limited availability in Minnesota, Massachusetts, and New York, and will soon launch in Wisconsin.
Haynes revamped the branding for this summer and is adding Paloma and Spicy Margarita variants. “We wanted to find a way to make the can jump a little more on the shelf for people that maybe weren’t familiar with the Big Star brand,” he explains. Like the original, the Spicy Margarita has 12% abv and retails for $20 a 4-pack, while the Paloma is just 6% and priced lower at $17 a 4-pack. “We figured that people looking to have more safe, intimate gatherings in small groups and backyards would want to have something familiar that tasted great, but also didn’t require having to break out the bar cart and mix something up,” Haynes adds.
Indeed, the Big Star Margarita has seen good success at Binny’s locations throughout Chicago, despite its steep price tag. “Because the quality of the product is excellent, and because of the local connection, the brand had quite a strong year,” says specialty spirits buyer Brett Pontoni, adding that the Tequila category overall is growing nicely at Binny’s. “We had good business throughout the pandemic, and agave was one of the leaders for us.”
Pontoni cites Patrón among the chain’s top performing Tequila brands, along with Casamigos, Don Julio, and Teremana. When it comes to the smaller players, he points to distillers Carlos and Felipe Camarena, whose Tequilas include El Tesoro, Tapatio, Ocho, Pasote, and G4, the last of which does particularly well at Binny’s. “We’ve always been big fans of the Camerenas, and we’ve always been big supporters in the category,” he says, noting that Chicago remains a good market for Tequila due to its vibrant on-premise scene and large Mexican population.
At ABC Fine Wine & Spirits in Florida, Tequila is the fastest-growing category behind Japanese whiskey, though the latter is on a much smaller base. “Tequila has grown in leaps and bounds,” says director of sales Alex Poreda. “In the last 12 months, our Tequila sales dollars are growing at over 50% and the units have grown at over 30 percent. So people are buying more premium. In fact, Tequila has almost breached about half of what vodka does in dollar sales, and vodka’s the largest subcategory.”
Best-selling brands at ABC include the usual suspects—Patrón, Don Julio, and Jose Cuervo—as well as Casamigos, Casazul, and 1800. “Those are the top-moving brands,” Poreda says, noting that Don Julio is showing huge growth due to trade up. “As far as new brands that are gaining traction, one of the biggest shining stars is Teremana from The Rock. The packaging is good. The quality is good. He went after slightly lower price points than the super-premium Don Julios and Patróns of the world. And I think his likeability across all ages and genres really helped launch that brand.” He adds that Michael Jordan’s Cincoro also came out of the gate strong, but at a much higher price point.
In the Tequila-based RTDs segment, Poreda says ABC did well early on in the pandemic, but as people started to learn how to make their own cocktails using better ingredients, that business began to fall off. “All of a sudden people were just researching or going on Pinterest and finding drink recipes,” he explains. “So as the RTD business slowed down, our cordial business rose quite a bit. People started coming in to buy Cointreau so they could make their own high-end Margarita. I think the trend of inexpensive frozen Margaritas with premixes is kind of running its course.”