Spendy Customers Continue To Propel Tequila Premiumization

Has tequila been your drink of choice lately? Maybe that’s a Paloma on a hot day, a high-energy margarita or a two-finger pour of extra anejo at the end of the night.

Well, you’re not the only one. A new report from CGA by NielsenIQ found that drinkers are opting for tequila over higher-end brown spirits.

The category of agave-based spirits is challenging whiskey and vodka, with recent growth outpacing both categories on more than one price tier. ResearchandMarket.com agreed, anticipating that the global tequila market size will reach $14.35 billion by 2028, expanding at a clip of CAGR of 5.4% over that period.

The forecasting platform finds that the biggest driver of this growth is tequila-based cocktails: ranch waters, palomas, Oaxacan Old Fashioneds, and the likes. 50% of tequila drinkers prefer cocktails are their serve of choice, 42% of drinkers prefer the spirit in shot form and 20% like it neat. CGA’s analysis expects blanco tequilas to grow at the speediest clip, largely caused by increasing demand for tequila-based cocktails from millennials. The margarita, ubiquitous and delicious, is a perennial #1 cocktail, as reported by CGA.

“Tequila will no doubt continue its ascension in terms of popularity and growth,” says Andrew Hummel, CGA’s Client Solutions Director of Americas. Tequila, representing 18% of spirits, is the only subcategory in the spirits space to achieve a growth of a share of over 1%.

The largest instigator of tequila’s big growth spurt is premiumization. While an uptick to higher-end is a broad-sweeping trend across the alcoholic beverage industry, tequila is seeing the most momentum, particularly in the premium and super premium price points. Purchasing platform Drizly has noted that inventory SKUs have grown 10.5% for blanco, 11% for reposado, and 15% for anejo in the last year.

Data from Distilled Spirits Council of the US (DISCUS) showed that sales of luxury spirits grew 43% in the last year, led largely by tequila and American whiskey. Tequila saw the biggest gains (75% annual growth rate) in the US market followed by American Whiskey and Cognac at 46% and 31%, respectively. Tequila sales in North America have been steadily increasing from 2002 until 2016, when sales reached a record high of $22.3 billion.

While all subsections of tequila – from blanco to extra anejo – are growing, the super-premium segment is seeing the biggest growth as consumers increasingly lean towards higher-quality (or perceived higher quality) tequilas with luxury branding. Several new premium tequilas, boasting everything from longer age statements to artisanal bottles, have hit the market over the last two years.

In 2019, Casa Herradura launched its premium tequila brand, Reserva de la Familia. Priced at $250 a bottle, it was available in limited quantities. Pātsch recently launched with an extra anejo ($345) as its flagship bottle. It’s aged for 7 years and is bottled in a unique glass bottle with a knuckle handle. Campari’s Espolon now offers a Cristalino tequila ($60), served in a slightly more suave version of the stubby bottle. 1800 Tequila recently auctioned off an extra-rare vintage in a custom-designed decanter from artist Leonora Carrington. The bidding started at $25,000.

“The spirits premiumization trend of recent years accelerated to a new level in 2021,” said Christine LoCascio, DISCUS chief of public policy. “Faced with restaurant and travel restrictions brought on by the pandemic, consumers increased their purchases of luxury spirits to elevate their cocktail experiences at home.”