Posted on | March 26, 2013
Written by | Jack Robertiello
When it comes to selling tequila these days, retailers and restaurateurs have little trouble getting product to move off the shelves and from the back bar. But the question is: which products? If anything, finding room for all the brands they’d like to sell is about the only “problem” end-sellers have.
Take Bayway World of Liquor in Elizabeth, NJ, not exactly a hotbed of Mexican culture nor an area known for passionate agave lovers. But in the past few years the local customer base started showing more and more interest in tequilas and not just the top five best sellers—they wanted to sample emerging brands that had caught the zeitgeist, like Avión, featured prominently in the HBO series Entourage, or the widely distributed newcomer Familia Camarena, busting onto the market behind the distribution power of brand owner Gallo. Buying tequila at a rapidly growing rate, they nudged the store toward more and more brands, according to spirit buyer Pat McCarthy, who continued to add shelf space and increase tequila SKUs. The category at Bayway World of Liquor is now three to four times larger than it was a few years ago, with a focus on newer and newly popular brands.
It’s a nice problem to have both for suppliers and retailers, but it’s not just anecdotal—the facts are in the numbers. Tequila volume continued to increase last year, and while its pace wasn’t as strong as some other categories (total increase of 2.9% according to the annual report from the Distilled Spirits Council of the United States), the category did exceptionally well at the high-end premium ($18-$30 SRP) and super-premium ($30+) levels—up 7% and 9.1% respectively.
In terms of raw dollars, the news is even better. Counting supplier gross revenues, tequila brings in the fifth highest revenue of all spirit categories—more than all Scotch whisky, in fact, more than Canadian and brandy/Cognac and more than twice what gin rings up.
“From a pricing perspective, we’re seeing the premium and super-premium categories growing,” says Vanessa Jenkins, senior director of tequilas for Beam. “There are an increasing number of savvy consumers expressing interest in 100% agave tequilas. In fact, about 50 percent of our net sales are from our 100% agave products and that number is growing.”
This growth stems from a number of trends, mainly the increasing number of 100% agave tequilas in the market, a good selection of which are now essential at any restaurant where quality drinks are served, and these brands continue to grab consumer interest and market share. New, well-funded tequilas keep emerging while the cost of production stays relatively low due to a glut of agaves.
Meanwhile, brands have been pushing the limits of what they can do under the rules set by the council that regulates tequila and mezcal production, especially in employing different oak regimens and introducing modern methods to craft higher-end expressions.
Don Julio 70 Añejo Claro is a good example: a fully aged añejo tequila, the spirit is then filtered until as clear as a blanco. Similarly, Maestro Dobel results from a proprietary blending and filtration technique using an array of differently aged tequilas: reposado, añejo and extra-añejo are blended and then filtered until “diamond” clear, as the supplier likes to say. Tequila 1800 in 2011 introduced 1800 Silver Select, which producers claim was the only 100 proof silver tequila in the market at the time, though others above 80 proof have joined the market.
Tanteo continues to develop the possibilities of flavored tequila with its line of pineapple, cocoa and tropical (mango, guanabana, pineapple and jalapeño). So, too, does Agave Loco, one of the more successful pepper-flavored tequilas, made with añejo and reposado spirits.
Luxury brands like these go a long way to extend the styles and price points in the tequila world. So, too, Excellia, a 100% agave tequila that rests a few weeks in Grand Cru Sauternes wine casks and Cognac barrels as a blanco, nine months for the reposado and 18 months for the añejo, the result of a partnership between Jean-Sébastien Robicquet, founder of EWG Spirits & Wine and master distiller Carlos Camarena. Sauza reintroduced its Tres Generaciones brand as an organic tequila, resulting in nearly a 30% volume increase in the last year. Casa Noble now offers single-barrel tequilas, a practice common among whiskey producers but rare among tequilas. 901, a triple-distilled blanco tequila, picked up quick awareness among consumers from its partnership with pop star Justin Timberlake.
A series of “experimental” spirits, Expresiones del Corazon, are the result of work done by brand owner Sazerac, showcasing tequilas aged in four different types of used barrels: a reposado aged in Buffalo Trace barrels for 11 months, and three añejos—one aged in Sazerac Rye barrels, one in George T. Stagg barrels and one in Pappy Van Winkle barrels.
In late March, Herradura will unveil the first of its Colección de la Casa limited edition, which will annually represent a change in one of the five sources of tequila flavor—agave, water, fermentation, distillation and maturation. The 2013 edition is Colección de la Casa Port Cask, which targets the concept of altering the maturation process.
Some of the changes may have confused tequila consumers, says Mac Gregory, director of food and beverage of Starwood Hotels and Resorts. “The introduction of muy añejo [extra añejo] may have changed things somewhat—the American palate was used to the silver, reposado and añejo concepts, but the muy añejo took them back a bit. It was a great move for the tequila business overall, but consumers still don’t really understand it.” Of course, the luxury consumer is always looking for and willing to spend for a new experience; Gregory instructs his properties to offer their rare products, in smaller pours, even down to one-eighth of an ounce, in order to make the ultra-premium expressions more accessible even to the well-heeled.
BRAND vs. CATEGORY vs. REGION
As Americans continue to get smart about tequila, more brands are being made with U.S. consumers in mind. But selling them in ways similar to Scotch—where designated regions are considered of utmost importance—is harder with tequila, although numerous tequila-focused restaurants do so, like Tres in San Francisco, which identifies the regional sources for all 125+ tequilas they carry.
Retailers, however, are slow to differentiate their wares the same way. Forrest Cokely, liquor specialist for Hi-Time Wine Cellars in Costa Mesa, CA, observes, “Regionality isn’t really a thing I can promote. The big houses like Herradura make sure they get a cross-section of agaves from all over, and most large producers must.”
In fact, even stores like Bayway keep their tequilas organized by brands rather than by sub-category, to make it easier for tequila buyers to move within the category, discover new brands, and trade up and down in price and quality depending on the occasion. All this made it easier for Bayway to expand its tequila base because shoppers still learning about the spirit could discover at their own pace.
Tequila connoisseurs have long argued whether tequilas made in the Los Altos highlands differ significantly from those from the Tequila Valley. Highland tequilas are said to be more fruity and sweet, while lowland brands are said to be more spicy, herbal and earthy. These qualities are mostly evident in silver and sometimes reposado tequilas, which offer more natural agave flavors and aromas.
Bar owners frequently say that customers are teaching themselves about the geographic differences among tequilas, favoring the recent influx of highlands-identified spirits, particularly those with a sweeter flavor profile. Insiders have noted that while some highlands producers proclaim a huge difference between their agaves and those from the valley, there isn’t perfect agreement that a tequila will be easily identified by location.
THE MARGARITA FACTOR
Gaston Martinez, who travels the country on behalf of Milagro Tequila developing cocktail programs for restaurants, says those factors aren’t much in evidence beyond listing the tequilas in regional groups. Restaurant generally say only that they prefer drinks made with blanco tequila, chains prefer to have specialized variants on the Margarita, independents and craft bars are more interested in drinks that take a different approach. But much depends on location. On the West Coast, bars and restaurants want more fresh fruit-driven and seasonal drinks, while in the East, more potent, stirred drinks using longer-aged expressions are appreciated. He’s even been asked for a barrel-aged Margarita.
Meanwhile, branded Margaritas are making headway. At the recently opened Stampeded 66 in Dallas, a half-dozen or so Margaritas differ in fruit components (passion fruit, guanabana, etc.) and brand included (Cuervo, Partida, etc.). Not too far away at Haceinda on Henderson, a handful of tequilas infused with pineapple, strawberry and habanero with mango are served at five degrees from a draft system or used as ingredients in cocktails.
The biggest change in the mass-market restaurant world, says Martinez, is the replacement of mixto tequilas with inexpensive 100% agave brands in the bar well, and a slow but steady movement away from giant schooners of frozen Margaritas.
Still, the appeal is undeniable. Jimmy Buffett’s Margaritaville restaurants served more than 4 million Margaritas throughout 2012, and for the February 22nd National Margarita Day, the chain offered a one-hour Margaritaville University Margarita-making class. At the 41 Abuelo’s Mexican Restaurants, the National Margarita Day celebration featured discounted Margaritas including the 1800 Hand-Shaken Margarita and the Frida Margarita (Herradura Silver, Grand Marnier, agave nectar).
At the more experimental end of the spectrum are bars such as Chicago’s Mercadito, where numerous creative agave cocktails make the list—Big Nose Goes to Mexico (Herradura blanco, tequila reposado, dark rum, guava and orgeat syrup), Pepino el Pyu (Tres Generaciones blanco, cucumber, lemon, hoja santa and cumin salt), Black Sand (blanco tequila, watermelon, dry vermouth, Mexican oregano, mint and black salt), and the Dizzy Oaxacan (mezcal, grapefruit, lemon, ginger beer, bitters and cayenne pepper.)
In an separate bar, Double A, below Mercadito, the same drink developers (the Tippling Brothers, Tad Carducci and Paul Tanguay) put together a more contemporary menu, with cold drinks (Easy to Love, made with Milagro blanco, Aperol, honey syrup and lemon) and hot (Hot Mulled Cider with Olmeca Altos reposado, apple cider, thyme, chiles morita and guajillo, clove and cinnamon).
Even in Las Vegas, the home of the bad frozen Margarita in a bucket, bars are stepping up their tequila game. The Cosmopolitan Hotel’s bars and restaurants serve, among others, the Madame Curry (Gran Centenario Reposado, mango purée, curry spice, yuzu sour and simple syrup).
The biggest change in many years in the tequila business in the U.S. market promises to be the move (announced in March, to take effect July 1st) by Jose Cuervo from long-time distribution partner Diageo to Proximo Spirits, where Cuervo brands 1800 and Gran Centenario already reside. The much-smaller Proximo will have its hands full managing the fortunes of the world’s largest tequila brand, especially as consumer attention is increasingly turning to niche and specialty brands.
Whatever happens, you can probably bet on the fact that when 2013 is done, the American market will have continued to order more tequila, made in more ways and served in more drinks. Whether those bottles and drinks hinge more on brand name, origin or stylistic category may have to wait for 2014.
Tequila is made from the blue agave plant, which resembles a cactus but is actually a member of the lily family. At the heart of the plant is the “piña” (similar in appearance to a pineapple), which produces the aguamiel (“honey water”) that is fermented and distilled.