There was a time, not too long ago, when Tequila was defined by shots and the classic Margarita, and was led by only a few big brands. “There was Cuervo or Patrón, and it was mixto or 100% agave,” says Martin Hoffstein, co-founder of Jaja Tequila. “Now, in many ways, Tequila is experiencing what whisk(e)y has seen—there are so many different styles on offer, with brands playing around with different casks, aging periods, and more.”
Tequila has moved into 2020 telling a markedly different story than the one it told a decade ago. A flurry of activity has resulted in a proliferation of prominent new brands and unique expressions, many at the luxury end of the category. Such wide-ranging innovation has consequently expanded the very notion of what Tequila can be: It’s no longer relegated to high-octane, lowbrow celebrations at the bar. As the category has received more attention, its U.S. volume has risen in tow; in 2019, some 22.7 million cases of Tequila were imported from Mexico, up 11.2% from the year prior and a vast increase from 2010, when imports stood at 13.15 million cases, according to Impact Databank.
The lion’s share of Tequila’s volume is in its blanco expressions, which remain the entry point for many consumers and serve as the preeminent mixer in Tequila-based cocktails. Increasingly, however, aged iterations like reposado and añejo are taking a greater portion of the spotlight, as consumers move toward sipping Tequila neat and enjoying it in traditionally whisk(e)y-based cocktails. Concurrent with the rise of aged Tequila are greater experimentation with unique cask finishes and extended aging periods, the results of which are enjoying considerable attention from both consumers and the trade.
But Tequila still has its own set of roadblocks. Amid the Covid-19 closures that have impacted the on-premise, this key sector for many brands has been shattered. At the production level, agave supply is still enduring a crunch as new brands flood the market. Despite those complications, many Tequila makers share an optimistic outlook, as the category’s retail sales have surged spectacularly in the wake of the pandemic, and more planted agave is slated to come on stream by the end of 2020 to loosen the supply valve.
Leaders In Luxury
U.S. consumers have wholeheartedly embraced Tequila, especially at the luxury end, where innovation abounds. This has supported the recognition of 100% blue agave Tequilas, whose share of the category has risen considerably from a decade ago, when it stood at just 17.8% of total Tequila imports; that number reached an all-time high in 2019, hitting 57.6%, according to Impact Databank. At the top of the luxury heap is Patrón, which jumped 11% last year to 2.8 million cases. Key to Patrón’s gains are its aged expressions: Reposado ($50 a 750-ml.), Añejo ($55), and Extra Añejo ($90). “Our core aged Tequilas are up anywhere from 25%-75% in the past year, which is incredible,” says Patrón global vice president of marketing Adrian Parker. “We’re seeing a lot of traditionally Bourbon or whisk(e)y drinkers switch over to barrel-aged Tequila expressions. There are also a lot of blanco drinkers who are now moving through the category toward more aged expressions.”
To meet the heightened demand for its aged offerings, Patrón unveiled a new barrel-aging facility last October, bringing its total capacity for aging spirits to over 20,000 barrels—double the previous level. The 17,000-square-foot space features a tasting area for brand education, as well as an underground bar for entertaining. In conjunction with the new facility’s debut, Patrón released its oldest expression to date: Extra Añejo 10 Años ($350 a 750-ml.). “The first batch was depleted in a matter of two to three weeks,” says Parker. “And that response alone is such a strong indicator of the appetite for older, more premium expressions.” The 10-year-old Tequila was aged in a mix of American oak and American-Limousin oak barrels prior to bottling at 40% abv. Bacardi’s 2018 acquisition of Patrón has greatly supported the brand’s ongoing, upscale innovations.
Elsewhere in the luxury Tequila space, Herradura has also taken to innovation in maturation. Later this year, the Brown-Forman-owned brand is set to introduce Legend, which is first and foremost focused on unique barrel-aging techniques. “We’re putting this liquid into brand new barrels, whereas Tequila is typically aged in used Bourbon or whisk(e)y barrels,” says Simmonds. “Herradura Legend, on the other hand, will go into new, charred oak barrels that have man-made grooves, which allows the liquid to reach even more of the barrel.” The $125 Tequila is aged for 15 months and is similar to non-peated Scotch whisky, according to Simmonds. Herradura surpassed 200,000 cases last year, hitting 213,000 cases on growth of nearly 11%, according to Impact Databank.
Don Julio has long held the No.-2 position in luxury Tequila, with the brand’s stateside volume skyrocketing by 23.5% in 2019 to 920,000 cases. This year, the Diageo-owned brand is expected to cross the 1 million-case mark. While Don Julio’s core offerings remain the primary volume drivers, such limited-edition expressions as Reposado Double Cask ($65 a 750-ml.)—whose second iteration, released last July, featured Tequila finished for two weeks in casks that previously held Lagavulin Islay single malt Scotch—have ignited additional excitement for the brand.
In 2017, Diageo further supplemented its high-end Tequila holdings with the acquisition of Casamigos. Like its luxury portfoliomate, the brand posted significant growth last year, rising 35% to 450,000 cases, according to Impact Databank. Together, Don Julio and Casamigos buoyed Diageo’s collective U.S. Tequila sales to 35% growth in the six months through December 2019. In light of the coronavirus pandemic, both brands have reported strong growth in retail channels, with Don Julio up 44% and Casamigos jumping 84% in the four weeks through March 22, according to IRI data.
New Kids On The Block
While old Tequila standbys successfully cultivate ardent fanbases, newer brands are also igniting fervent enthusiasm. Last September, basketball legend Michael Jordan and a group of NBA team owners debuted Cincoro, an ultra-luxury Tequila label produced at Destiladora del Valle de Tequila (NOM 1438). The brand is currently comprised of Blanco ($70 a 750-ml.), Reposado ($90), Añejo ($130), and Extra Añejo ($1,600) expressions, all of which are blends of Highland and Lowland agaves that underwent hundreds of taste tests prior to finalization. “The signature Cincoro taste profile highlights the terroir of the agave,” says Cincoro co-founder and CEO Emilia Fazzalari. “Each expression is a one-of-a-kind Tequila experience akin to a single malt Scotch, Bourbon, or fine wine.” Previously limited to 12 markets, the brand expanded into 25 states earlier this year, with more set to follow in the second half of 2020.
2018, meanwhile, saw the debut of Jaja Tequila, the brainchild of Jerry Media founder Eliot Tebele, his brother Maurice Tebele, and their childhood friend Martin Hoffstein. Imported by Shaw-Ross International, the brand highlights the millennial enthusiasm for Tequila, particularly at more elevated priced points. Jaja’s Blanco, Reposado, and Añejo expressions—retailing at $35, $40, and $52 a 750-ml., respectively—have grown 230% cases in the two years since its debut, bolstered largely by the 25-35-year-old consumer base. “The younger demographic are drinking brands like Casamigos, not necessarily because of George Clooney or Rande Gerber, but because they think that’s what they’re supposed to drink, similar to how I felt with Patrón when I was 21,” says Hoffstein. “With Jaja, our goal is to create a lifestyle brand that’s fun and lighthearted. We don’t take ourselves too seriously, but we want people to know why they’re picking up a bottle of Jaja, and how they can be a part of the lifestyle we’re cultivating.”
Social media is the nexus of Jaja; activations and influencer marketing are crucial in reaching that younger consumer subset. Prior to Covid-19, the brand was set to release a more luxury expression aimed at nightlife occasions, but that launch has been postponed due to the coronavirus. Hoffstein notes that the brand is exploring different styles of Tequila, among them a Sherry cask Reposado as well as Cristalino and rosé-style expressions.
Also in 2018, Constellation Brands debuted Mi Campo, which, like Jaja, is aimed first and foremost at millennials. The brand includes Blanco and Reposado Tequilas (both $25 a 750-ml.), both of which are produced at the La Cofradia distillery, where Constellation’s high-end Casa Noble is also made. While the Blanco is rested in Napa Valley Chardonnay barrels for three weeks prior to bottling, the Reposado is aged for three months in a combination of Cabernet Sauvignon and Pinot Noir barrels.
Newcomer El Tequileño is another brand in Tequila’s new guard that’s lending fresh impetus to the category’s growth. Originally founded in 1959 as a family-run Tequila house on Chiapas Street in Jalisco, Mexico, El Tequileño was acquired by Alberta, Canada-based Paradise Brands in 2017. It recently hit U.S. shores with a portfolio that includes five Tequilas, all at 40% abv: Blanco ($25 a 750-ml.), Reposado ($27), Platinum ($55), Reposado Gran Reserva ($57), and Reposado Rare ($225), aged six years in an American oak pipon, an extra-large barrel. Marketed by Miami-based Park Street Imports, El Tequileño is currently available in 13 states. Adding value to the brand experience, last year Paradise opened the Casa Salles Hotel at the site of the distillery. The facility, which was built out from from one small tasting room, has a 25-room hotel offering restaurant services and an immersive brand experience.
As more Tequilas come on stream, and more producers experiment with unique cask aging and extended maturation periods, occasions have expanded. Promoting Tequila as a sipping spirit, in particular, has become a major point of focus for many brands looking to further elevate their expressions and reach a wider, whisk(e)y aficionado audience. “In Mexico, 70% of Tequila consumption is done neat,” says Patrón’s Parker. “It’s not cocktails, it’s not shots. As the American palate evolves, that sipping, neat occasion for Tequila is going to be more important, and that means the quality, smoothness, and flavor characteristics matter even more as well.”
For William Grant & Sons, the rise of sipping Tequila has resulted in increased gains for certain line extensions of its Milagro brand. “As consumers begin to enjoy sipping Tequila, we’re seeing our Select Barrel Reserve range grow in some of our larger markets,” says Jill Palais, senior brand manager of Milagro. Retailing at $53-$99 a 750-ml., the Select Barrel Reserve range features a Silver Tequila aged for 30 days in French oak, as well Reposado and Añejo expressions aged in combinations of French and American oak. Palais notes that even as more consumers move toward sipping luxury Tequilas, the trend is still in its nascent stages. “Tequila as a sipping spirit is only just starting to gain momentum in many parts of the country,” she adds. Milagro has had steady upward momentum in recent years, rising 3.7% in 2019 to 306,000 cases, according to Impact Databank.
Upscale brand Código is also a sipper, though it also offers a robust cocktail component. Código is now in all 50 states, with Southern Glazer’s Wine & Spirits (SGWS) handling the brand in 45 states. The portfolio includes a Blanco ($45), Rosa Blanco ($60), Reposado ($65), Añejo ($120), Extra Añejo ($300), and a limited-edition 12-year-old Añejo ($2,500). Sales volume skews about 30% on-premise and 70% off-premise. Código has an active custom barrel program, with on-premise operators like Puesto Mexican Artisan Kitchen & Bar—a southern California-based restaurant with six locations—among many enthusiastic participants. Puesto’s bar team visited Código’s distillery in Amatitán recently to select their barrels, creating a custom blend with its own label. The blend will be incorporated into a signature cocktail to celebrate Puesto’s post-pandemic reopening, and also be sold by the bottle at Puesto locations.
Enjoying Tequila neat is also taking off for Campari America’s Espolòn and Cabo Wabo labels. “With the growth of Tequila comes refinement, and some brands, including Espolòn and Cabo Wabo, have successfully released añejo and extra añejo offerings with sipping appeal that we believe is on par with Cognac or Scotch,” says Campari America director of white spirits Bernadette Knight. Of Campari’s two Tequila labels, Espolòn in particular has contributed to massive growth for the company; the brand surged past the half-million-case mark in 2019 on growth of 30.1%, following a trend of strong double-digit growth over the past six years, according to Impact Databank.
Behind the bar, Tequila is moving past the mainstay Margarita in favor of drinks that better showcase the spirit’s versatility. While the Margarita does still play a role for many brands, its makeup is being tweaked. “We’re still using a cocktail approach to grow awareness for our Blanco Tequila, but we’re not going with a classic Margarita; we’re instead trying to elevate the Margarita,” says Katherine Foley, brand manager for Infinium Spirits’ Los Arango. “We’re introducing a couple of signature cocktails that are lighter and more aromatic, as opposed to especially bold or juicy.” Los Arango relaunched in 2018, and was taken nationwide earlier this year. Currently producing just under 1,000 cases, the brand plays at the higher end, with its Blanco, Reposado, and Añejo expressions retailing at $40-$60 a 750-ml.
Brown-Forman-owned El Jimador ($28 a 750-ml.) is also looking toward simpler, cleaner Tequila serves. “We’ve shifted our strategy, now focusing on simple craft cocktails with fresh juices, clean ingredients, and accessible garnishes,” says El Jimador brand manager Chrissy Wallace. She points to such drinks as the Bloody Maria and Paloma as key serves moving forward. Pushed at a slightly lower price point than its portfoliomate Herradura, El Jimador reached 678,000 cases last year on growth of 9.4%.
Elsewhere, popular whisk(e)y-based cocktails are serving as an entry point for aged Tequilas behind the bar. “Mixologists like reposado and añejo Tequilas because they can stand on their own,” says Herradura’s Simmonds. “Those expressions give them more flavor notes to play with, which come from the barrels, and they do particularly well in an Old Fashioned or a Manhattan, giving those drinks a new flair.” The brand is currently partnered with cocktail delivery service Cocktail Courier; while elevated Margaritas are a point of focus for the summer months, Simmonds notes that the brand is eyeing the introduction of an Añejo-based Old Fashioned in the future.
With some 7.3 million cases depleted in 2019, according to Impact Databank, No.-1 Tequila brand Jose Cuervo is also now lending credence to aged Tequilas as both sipping spirits and crucial cocktail components. “We’re seeing new drinking habits emerge as people begin to use Tequila beyond Margaritas, and look for more complex, high-quality expressions to replace traditional brown spirits like Bourbon or rum,” says Lander Otegui, senior vice president of marketing at Proximo Spirits, which handles Cuervo in the U.S. The brand debuted the first-ever añejo within its 100% blue agave Tradicional lineup in April; the $33 expression was aged for more than 12 months in new American oak barrels and then finished in a combination of second- and third-fill Irish single malt whiskey barrels from Old Bushmills Distillery for up to four months. “This new expression [Tradicional Añejo] debuts stateside as both Irish whiskey and Tequila soar, and we’re seeing usage in more classic cocktails like the Old Fashioned and the Negroni,” Otegui adds.
Given Tequila’s position in cocktail culture and the spirit’s staying power behind bars both boorish and opulent alike, most of its major brands have been impacted by Covid-19 closures. Even so, many have successfully pivoted their marketing strategies to retail—overall, Tequila was up 114% in Nielsen channels in the week through May 9, thanks in part to the Cinco de Mayo holiday. Alongside the increased focus on retail accounts is a strong show of support for the hospitality community, with many brands throwing their weight behind various industry-focused non-profits and organizations.
Espolòn, for one, has partnered with news website The Daily Beast to both promote at-home drinking occasions and support bartenders across the country. “The program involves bartenders developing simple cocktail ‘how-to’ video content, which both solves a consumer problem by demonstrating how to drink Tequila at home and supports bartenders who have been affected by Covid-19,” says Knight. Recently, The Daily Beast featured a cocktail demonstration from Parker Luthman, bartender at Providence, Rhode Island-based The Eddy, on how to mix up an Espolòn-based Sweet & Sour Mule.
Even as retail sales remain strong for Patrón, buoying the hospitality industry will be a key priority for the brand moving forward, according to Parker. “Throughout the year, we’ll continue to fund, donate to, and work with organizations like the James Beard Foundation,” he says. “We’ll continue to do business, but we’ll do it simply and thoughtfully, and our focus will absolutely be on the bartenders and restaurants that have served us over the years.” As the pandemic devastated on-premise venues, Patrón split a donation of $1 million among the James Beard Foundation, Children of Restaurant Employees, and Another Round, Another Rally.
Aside from the widespread impact of coronavirus, limited agave supply also remains an acute issue. While some longstanding labels like Patrón have cemented stable partnerships with massive grower communities, not all brands have access to such resources. “Mature agave plantations cover only half of the demand for Tequila and other industries,” says Milagro’s Palais, who adds that agave pricing currently ranges anywhere from $1.22-$1.37 a kilo. At Los Arango, such wavering agave costs have impacted the brand, though Foley notes that it has absorbed the cost to consumers as much as possible. “We’re very fortunate in that we haven’t had to raise our prices significantly, only a dollar or two for the most part,” she says. “But we’re keeping close tabs on each market on how they’re managing those cost increases.”
Still, there’s reason for hope in the not-too-distant future. “There’s plenty of agave from 2015 onward, it’s just not yet fully matured,” says Palais. “The 2016 plantations, which will come to market by 2021, will hopefully reduce the pressure in the market by the second half of this year.”