Mexican Fiesta

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With the growth and acceptance of Mexican restaurants in the U.S. continuing to rise, and with the Mexican population exploding throughout the nation, it’s no surprise that beverages from south of the border are seeing heady days. Tequila sales gained a hefty 8.6% in 2004 in the U.S., according to the 2005 Adams Handbook Advance, while Mexican beer sales outpaced the overall beer industry (essentially flat) with an estimated 3% gain in 2004. The Corona brand continued its lead in the imported beer category, with a 3.7% increase. Among tequilas, Jose Cuervo still dominates the market, with more than a 40% share of total category sales. The brand hit 1.4 million 9-liter cases in 2004, a 5% increase.

“Given that tequila only comprises 5% of the American distilled spirits market, there is tremendous opportunity for growth. The category is expected to grow faster than any other spirit category in the U.S., particularly within the super- and ultra-premium segments, both of which are anticipated to grow at double-digit rates,” noted Bevin Gove, marketing director for Jose Cuervo.

Reserva box 2005Jose Cuervo tequila, imported by Diageo, commemorated the distillery’s 200th anniversary by releasing the limited-edition Reserva de la Familia.

“There is a mystique and romance surrounding Mexican spirits that few other products enjoy,” said Larry Kass of Heaven Hill Distilleries, importer of El Conquistador and Two Fingers Tequilas. “Whether you’re talking about tequila, mezcal or Mexican beers, they’ve all seemingly captivated the American drinking public.”

Back On Track

One thing for certain, good times have once again returned for the tequila industry. The agave crops have fully recovered from the devastating blight of several years ago.

“A lack of agave is no longer an issue,” stated Andrew Floor, Sauza global brand director. “The soaring prices experienced through the crisis proved sufficient motivation for both established tequila houses and agave growers to increase the size of their plantations. The major tequila houses responded to the agave crisis by increasing controls over their estate plantation. Demand for open market agave has fallen significantly and kept costs low.”

0504mx3The line of Sauza tequilas, from Allied Domecq Spirits USA, notched a 10.4% sales gain in 2004.

The prolonged shortage of mature agaves ultimately caused retail prices of high-end tequilas skyward. With the supply of agave once again sufficient to meet demand, what can retailers expect to happen to tequila prices?

Master distiller Felipe Soto Mares of El Duende thinks relief for consumers is around the corner. “I believe we will see the current rate of retail price increases level off soon. We in the tequila industry are well aware that our products need to be priced competitively with vodka. We are also looking at the ever-growing rum market. Pricing issues are an ongoing concern and something that we are always reviewing.”

Tequilas in the Lime Light

Any discussion of the current status of tequila must begin with Jose Cuervo, the largest producer of tequila and the best-known tequila brand in the world. The distillery’s latest release is the silver-styled Jose Cuervo Clasico Tequila. It’s a blend of unaged tequilas and specially selected Cuervo tequilas mellowed in oak barrels. Don’t be mislead by its apparent simplicity — this is a complex and appealing tequila.

To commemorate the distillery’s 200th anniversary, the tequila-producing giant introduced Reserva de la Familia de Jose Cuervo, a limited edition, vintage-dated añejo. As the name implies, the tequila was once the private domain of Jose Cuervo and his descendants. Reserva De La Familia blend is comprised of tequilas aged in both new charred French and American oak barrels. The spirit is hand-bottled, numbered and sealed in wax.

Cuervo Tradicional Reposado is the best selling 100% agave tequila in Mexico. The vintage-dated, limited production tequila is aged in white oak casks for six months “Overall, the Jose Cuervo portfolio is growing at a rate of 6.9% in the first quarter of this year,” reported Gove. “The vigorous sales are being fueled by Jose Cuervo Tradicional.”

The Sauza Tequila line, from Allied Domecq, is continuing to make its mark: the second best-selling tequila in the U.S. market increased sales by 10.4% to more that 1.22 million 9-liter cases.

AnejoPatronThe Patron line of tequila, from The Patron Spirits Company, saw an extraordinary 69.3% sales increase last year.

The newest member of Sauza’s Estate Collection is Tres Generaciones Plata, the silver version of the distillery’s preeminent añejo. The 100% agave tequila is triple-distilled in alembic stills and bottled within 24 hours. Long the best-selling reposado tequila in the U.S., Sauza Hornitos is distilled in both alembic and column stills. Hornitos is then aged for four to six months in large oak vats, just enough time to soften its personality without being appreciably affected by the tannins in the wood.

El Tesoro tequilas, from Jim Beam Brands, features El Tesoro Paradiso, a revolutionary style of tequila. It’s a five-year-old, hand-crafted and finished in French oak previously used to age A. de Fussigny Cognac. El Tesoro Platinum is a superpremium silver bottled unfiltered and unaltered, exactly as it came out of the still. “El Tesoro tequila is made from estate grown agaves so it was unaffected by the recent agave shortages,” said Jeremy Betts, Jim Beam’s associate marketing manager of superpremium brands.

cazadoresCazadores, from Bacardi USA, hit sales of 195,000 9-liter cases in 2004.

Also imported by Jim Beam Brands is the brand credited with sparking the 100% agave tequila boom in the U.S. in the mid-80s. Made at La Gonzaleña distillery, Chinaco Añejo is an alembic tequila that is aged in American oak for up to three years. Its less assertive style makes it an ideal entrée for someone new to tequila.

More Brands Grow

The best-selling brand of 100% agave tequila is Patrón, sales of which increased almost 70% last year. Their range of tequilas is made in the mountains surrounding Jalisco and aged in small, American oak barrels.

The distillery recently introduced Gran Patrón Platinum, a triple-distilled, 100% agave tequila. A portion of each small batch is aged briefly in oak barrels prior to being blended back. The ultra-premium silver tequila carries a retail price of $160 per 750 ml.

1800 Silver;tequilaThe 1800 line of tequila, imported by Skyy Spirits, increased sales by more than 10% last year, to 345,000 cases.

Imported by Sidney Frank Importing, Tequila Corazón de Agave has grown 40% every year since it debuted in 2003. The 100% agave tequilas are produced entirely on the Destiladora San Nicholas in the highlands of Arandas. The Corazón range includes a Blanco, Reposado, which is matured in small, Canadian oak barrels for up to one year, and an Añejo, which is aged for a minimum of two years in oak.

For its part, Bacardi USA has had good success importing Cazadores, a 100% agave reposado aged in new oak barrels for a minimum of six months. The brand increased sales almost 15% last year to 195,000 9-liter cases.

Originally imported by Bing Crosby and Phil Harris in the 1950s, Herradura was the first brand of 100% agave tequila available in the U.S. Now imported by Sazerac, Herradura is one of the few brands that has always only produced 100% agave tequila.

El Jimador Reposado BottleThe El Jimidor line of mixto tequilas, imported by Sazerac, saw a hefty sales gain of 38.5% in 2004.

Sazerac also imports El Jimador, a line of mixto tequilas made by Herradura. Both brands are made on the Herradura estate from the same estate-grown blue agaves. They both undergo the same methods of fermentation, distillation and aging, although each process takes longer for Herradura Tequila. The brand is enjoying success in the U.S., increasing in sales last year 38.5% to 123,000 9-liter cases. The El Jimador range includes a silver and reposado, as well as an ultra-premium añejo, a limited edition, 100% agave tequila aged in oak barrels for a minimum of one year.

One of the most recognizable and successful brands of tequila, the 1800 portfolio of 100% agave tequilas, jumped by 10.2% in sales in 2004. Imported by Skyy Spirits, the line includes recently released 1800 Silver. Famed 1800 Reposado is matured for nine months, in lightly charred barrels. The flagship of the brand may well be the Reserva Antigua 1800 Añejo. The 100% agave tequila is matured an average of three years in deeply charred oak barrels. Skyy also imports ultra-premium Gran Centenario.

Sales of Diageo import Don Julio grew 28.1% in 2004. The super-premium line of 100% agave tequilas are made at the Tres Magueyes by master distiller Don Julio Gonzalez, who founded the distillery in 1942 at age 17. To commemorate his extraordinary career, the distillery has released an engaging, 100% agave tequila called Don Julio 1942. The ultra-premium añejo is aged in oak for a minimum of three years and is best appreciated in a snifter.

Another tequila patriarch was Don Eduardo Orendain Gonzalez. The family-owned Orendain Distillery opened in 1926 and it still ranks among the major tequila producers. Its most prestigious accomplishment is Don Eduardo 100% agave Tequila, imported by Brown-Forman.

What’s Next for Tequila

All of our futures should be so bright. Essentially that’s the consensus of the industry professionals we polled about the future of tequila.

Allied Domecq’s Andrew Floor believes that the growing surplus of agave means that we’ll continue to see a steady stream of new tequila brands. “Enthusiasts and novices alike will notice an influx of new suppliers offering a wide variety of production- and aging-based differentiators. We also expect the surplus of agave to precipitate the industry’s expected move into flavored tequilas.”

Leading Brands of Tequila

(Thousands of 9-Liter Cases)

Brand Supplier

2003

2004P % Change
Jose Cuervo Diageo 3,246 3,408 5.0%
Sauza Allied Domecq Spirits USA 1,110 1,225 10.4%
Montezuma Tequila Barton Brands 586 600 2.4%
Juarez David Sherman 400 420 5.0%
Patron The Patron Spirits Company 205 347 69.3%
1800 Skyy Spirits USA 313 345 10.2%
Margaritaville David Sherman 190 205 7.9%
Cazadores Bacardi USA 170 195 14.7%
Rio Grande Tequila McCormick Distilling 154 172 11.7%
El Jimador Sazerac 89 123 38.5%
Total Leading Brands 6,463 7,040

8.9%

Others 1,156 1,232

6.6%

Total Tequila 7,619 8,272

8.6%

(p) Preliminary Source: Adams Beverage Group Database

A recent graduate of the prestigious Academia Mexicana Del Tequila in Guadalajara, master distiller Felipe Soto Mares of the El Duende Distillery has spent time discussing the future prospects with industry notables. “There is little doubt that in the short term we will see increasingly more special bottlings of vintage delineated tequilas, more creative wood finishes and single estate bottlings of single cask tequilas. These are exciting times for us in the tequila industry, and ultimately it will be the consumer who is the real beneficiary.”

With costs now stabilized and consumer demand surging ever higher, prospects for retailers of tequila are once again primed for success.

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