Made In Mexico

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It didn’t take the North American Free Trade Agreement to get U.S. consumers to buy Mexican. Tequilas, brandies, liqueurs and beers from south of the border have been popular here for years. Nafta, a steadily growing Hispanic population and increasingly worldly consumers have helped grow these products even more dramatically in recent years.

Margaritas, for example, are the most popular cocktail in the country. Mexican brands now account for 40% of imported beer sales. Mexican brandies rank at the top of the list of the world’s best-sellers, as do coffee liqueurs from Mexico.

“Everything Latino is hip and cool across the food and entertainment categories,” said Jose Chacon, senior brand manager, tequilas, at Allied-Domecq. “The same dynamic is affecting our industry.”

“The number-one thing driving the popularity of Mexican products is the boom in Mexican restaurants in the past 10 years,” said Craig Johnson, group brand director, Allied-Domecq. “What’s driving tequila and Mexican brandies in particular is consumer interest in true, authentic Mexican products.”

Tequila’s Back

Tequila, which suffered a setback between 2000 and 2001, is back on a growth curve again. Agave shortages in Mexico, due primarily to a failure to anticipate growing demand, caused prices to rise dramatically at the end of 2000 and throughout 2001. As lower-priced “mixtos” dropped out of the market and more acreage has reached maturity, however, supplies have stabilized. Happily, in 2002, the category roared back, to the tune of an 8.1% increase, to more than 7.1 million 9-liter cases, according to the Adams Handbook Advance 2003.

“People stayed away as prices went up,” Chacon said, “but now they’re coming back. We’re seeing better prices on Sauza as agave supplies grow, and we’re getting back to fundamentals of the business to get the brand back on track and back to historical levels of growth.” Indeed, according to preliminary research, the Sauza line grew by double-digits in 2002, according to the Adams Handbook Advance 2003, to more than 1 million 9-liter cases.

Category leader Jose Cuervo, which also saw its phenomenal sales growth slow during the past two years due to higher prices, is also seeing renewed growth. The combined Jose Cuervo line increased sales 4.8% in 2002 to more than 3.4 million 9-liter cases. The brand owns its own supply of agave fields. While it doesn’t see the shortage completely ending until 2006 because of the plant’s 8- to-12-year maturation, it has definitely eased. Sauza

Sauza tequila sales rebounded last year by 18.8%.

Cuervo Gold is continuing its focus on the “CuervoNation” program this year. Consumers will have chances to win trips to exciting CuervoNation “outposts” and ultimately a trip to the brand’s 8-acre Caribbean island. Diageo’s Jose Cuervo portfolio now includes the best-selling Jose Cuervo Especial (Gold), Jose Cuervo Tradicional, made with 100% blue agave; Jose Cuervo Añejo, also made from 100% blue agave and aged for at least one year in American oak barrels; and Jose Cuervo Reserva de la Familia, made from 100% blue agave, and produced in limited quantities after being aged in new French and American oak barrels.

To continue bringing consumers back to the category, Cuervo plans to launch a product line extension later this spring. Details likely will be available when this issue comes out.

To kick off the summer selling season, Allied-Domecq’s Sauza will be partnering with regional out-of-category suppliers for Cinco de Mayo. The promotion promises to generate excitement for both the brand and the category.

Two Fingers, imported by Heaven Hill, will take advantage of flattening prices this year by repositioning the brand. A summer co-pack promotion with margarita mix will help draw attention to a new label destined to give the brand’s signature black bottle better shelf presence. Cuervo

Jose Cuervo is highlighting its CuervoNation program in Cinco de Mayo point- of-sale.

As the core business starts to grow again, the brands that expect to benefit most are super- and ultra-premiums.

“While the value-priced tequilas were off about 12.2% from 1998 to 2001, ultra-premiums were up 7.5%,” said David Dorsey, brand director at Brown-Forman. “Ultra-premiums are still doing very well. We’re seeing good growth on Don Eduardo.”

“Tequilas will see the next boom in ultra-premium brands, like vodka did a few years ago,” said Kathleen DiBenedetto, group product director at Jim Beam Brands, which imports El Tesoro and Chinaco. “They’re still considered a white spirit, and consumers are more educated now. They know about 100% agave tequilas, and what reposado and añejo tequilas are.”

Jose Cuervo, in fact, is putting a little more emphasis on its superpremium Tradicional and ultra-premium Reserva de la Familia. The producer’s web site, now in both English and Spanish versions, uses Tradicional as an example of the brand’s 200-year Mexican heritage.

Each year’s bottling of Reserva de la Familia is packaged in a special edition box designed and hand-crafted by a different Mexican artist. TwoFingers

Two Fingers Tequila, from Heaven Hill Distilleries, is running a co-pack promo with Margarita mix this summer.

Sauza also makes use of higher-end products in the brand portfolio to get consumers to trade up. Both Hornitos and Conmemorativo recently added 1.75-liter packages to their mix, the first superpremiums to offer that size. Tres Generaciones gives Sauza presence in the ultra-premium segment.

“People tend to stay in the Sauza franchise even as they try new tequilas,” Chacon said. “They feel comfortable and confident when they try new products in the family.”

Jim Beam’s El Tesoro relies heavily on brand ambassadors, including master distiller Carlos Camarena, to spread word-of-mouth praises for the brand. They’ll concentrate on accounts in nine markets this year, conducting tastings and educating staff in both off- and on-premise accounts. New packaging also will be introduced in May.

El Conquistador, from Heaven Hill, uses shelf talkers to explain differences between blanco, reposado and añejo as well as tasting notes for each. Like other ultra-premium brands, it competes in a variety of spirits tastings for awards which help generate interest in the brand.

Leading Brands of Tequila
(thousands of 9-liter cases)

Brand Supplier
2001
2002 (p)
% Chg
Jose Cuervo/1800 (*) Diageo 3,311 3,470 4.8%
Sauza Allied Domecq Spirits USA 850 1,010 18.8%
Montezuma Tequila Barton Brands LTD 487 650 33.5%
Rio Grande Tequila McCormick Distilling 108 162 50.0%
Cazadores Bacardi USA 110 120 9.1%
Total Leading Brands 4,866 5,412 11.2%
Others 1,718 1,705 -0.8%
Total Tequila 6,584 7,117 8.1%

(*) Includes 1800 Tequila through 9/02; 1800 Tequila is now handled by Skyy Spirits.
(p) Preliminary Source: Adams Handbook Advance 2003

Even Montezuma, from Barton Brands, leverages its awards to help spur sales at retail. The brand has won both gold and silver medals from the Beverage Testing Institute. As the third best-selling brand in the U.S., Montezuma had a stellar year in 2002, upping its sales by 33.5% to 650,000 cases nationally. While operating from a smaller base, the fourth-best-selling tequila, Rio Grande, from McCormick Distilling, increased sales by 50% to 162,000 cases nationally in 2002. [McCormick has also had success with Tequila Rose, a 34 proof product that is a strawberry-flavored cream liqueur mixed with tequila, as well as Tarantula Azul, a citrus-flavored tequila in an eye-catching package.] And Bacardi USA had success last year with Tequila Cazadores, which saw sales increase 9.1% to 120,000 cases nationally.

Interestingly, several changes of tequila brand ownership and distribution have occurred during the past year. Skyy Spirits is now handling 1800 Reposado and Añejo Tequilas and the superpremium Gran Centenario, brands that had previously been part of Diageo’s portfolio here in the U.S. Margaritaville, first introduced by Seagram about five years ago to tremendous initial success, has landed at David Sherman Corp., which is trying to recapture the brand’s excitement. And the smaller superpremium brand Corazon is now being handled by Sidney Frank Importing.

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