Gringo Honeymoon

Brandweek, Nov 9, 1998 by Theresa Howard

America's fascination with high-end, well-aged liquor has spurred a whole new tier in the bestselling tequila category, as companies look to trade up tequilistas and trade over Scotch drinkers. But is there room for all the new products?

Envision wafting cigar smoke, mahogany fixtures, classic books, the stuff of Republican enclaves, now somehow transformed into a semi-hip stop on a tour of the "cocktail culture." Imagine not a slice of lemon, a dash of salt or a resounding "Salud!" but rather a corporate card and a chink of glasses. Picture proverbial "nights on the town," haute clubs, dark snifters of rich, smokey, single-barrel... tequila.

Welcome to a new tequila culture, which may seem like something a little more stolid than you're used to, courtesy of a new breed of ultra premium sipping tequilas. Even as tequila continues to outpace all other spirits when it comes to sales and consumption, spirits companies are creating a whole new tier to the category with high-end line extensions that seem to mirror the same tried and true product elevation strategies undertaken by Scotch and whiskey brands in which aging processes translate to bigger and better, especially in terms of profit margins. Defined equally by stylish packaging, hefty price tags, prized shelf space both on and off premise and a demographic profile that skews toward free-wheeling, high-spending men and women in their late 20s to late 30s, ultra premium tequilas are providing additional growth opportunities in an already healthy segment and changing the way consumers view the product.

"What you are seeing is consumers, as they mature, trading up, as well as the sophistication of the category in general," said Steven Goldstein, vp of brand publicity, UDV North America. "Tequila in general has shed its dusty barroom image and gone uptown."

While tequila drinkers may have matured over the years, they have also been influenced by other societal forces, like the resurgence of the classic cocktail. Among younger consumers, this movement toward martinis and high-end liquors, served in affectedly swanky environs, has been dubbed cocktail culture. This has been confluent with a consumption shift by an older generation, notably baby boomers, toward sort of late-life, post-yuppie, post-health club pampering mindset, manifest in an occasional treat of single-malt Scotch and a thick cut of steak. Between the two, there has emerged a broad market for new, full, distinct tastes on the top shelf of the bar, or behind the counter at the liquor store, with prices-per-bottle ranging from $35 to $1,000 for ultra premiums. Obviously, at that price, this ain't your hard-edged tejano hooch anymore, much less the stuff of margaritas.

"The resurgence of the classic cocktail has got consumers drinking spirits straight up again," said Mike Ginley, marketing director of Sauza Tequila, which boasts a triad of three ultra premiums under the Sauza umbrella. "In the past, categories like vodka were used as mixers but today there is once again the appreciation of the spirit on its own. People are not doing body shots or slamming them."

"These tequilas provide an opportunity to sip and savor," said UDV's Goldstein. "Anyone using either Anejo or Coleccion mixed should be sentenced to jail."

UDV's Cuervo 1800 Anejo and Coleccion are just two of the four ultra, in some cases ultra-ultra, products in Cuervo's highend sister portfolio, 1800. Allied Domecq only recently rolled a new brand into its Sauza line, Sauza Triada, joining Sauza Galardon and Sauza Tres Generaciones. Galardon, priced between $30-35 a bottle, hit the market last summer while Triada is a new entry that will hit at $45 by year's end.

"As consumers' overall appreciation for tequila increases they become more interested in seeking out better tequila drinking experiences," Ginley said. "What we are seeing is a real consumer shift as they seek out a quality product with a distinctive taste profile and unique product credentials and packaging."

Tequila's share of total spirit consumption has shown steady growth, topping off 1997 at a 4.3% market share. Overall, volume jumped 7.5%, to 6 million cases, compared to 5.6 million in 1996, double expectations, a big jump in a long-flat market. Such booms inevitably attract businesspeople looking for a piece of the pie. Anheuser-Busch has implemented a test of an Agave-flavored beer, Tequiza. Tequila Rose Distilling, Westin, Mo., has itself looked to carve out a niche with its namesake brand, a strawberry liquor infused with Tequila. The company is spending $1 million to attract women with the flavored twist on two liquor industry hot-buttons, cream liqueur and tequila, per the campaign's tagline, "Add some color to the night." The beverage rates as one of the 10 "hottest new drinks," according to a survey by trade group Beverage Network. First year sales of the product in 1996 were four times greater than projections, said Pattie Sheehan, vp/director of client service at Tequila Rose's agency, Gams, Chicago, and 1998 sales are on track to double this year's projections.