Recent trends have shown that the premium tequila boom across the US has slowly declined but has turned into substantial growth. The United States had been witnessing an era of growth for premium tequila brands however, today, other brands within the lower price segments are growing rapidly at a similar rate. The US had only seen volume growth in double digits but this time there is an increase by only 4% in the first of 2023 as compared to that of 2022.
There is no doubt that there is growth but it is evident that it’s of a much smaller volume base. It seems as if the roles have been reversed along with improvements in the quality of the product and profitability ; there is an overall upgradation in terms of the quality across all price tiers of tequila depicting a trade down of the product. Influx of new brands has led to an increase in competition making it difficult for brands to stand out amongst others. Moreover, even celebrity-backed brands have a saturation point and have normal sales and volumes since there are a huge number of brands coming up.
Additionally, while maintaining margins was an issue earlier, now even through lower-priced products manufacturers are able to deal with the hurdles related to the same. Contrary to how vodka is seen as un-aged, tequila helps customers see more opportunities to trade up with better quality coming even in the lower segments. Tequila presents with this trend, a similar trend that followed with vodka category post 2008. However, the premium tequila market has grown so much in recent times that it’s even more difficult to expand the same in the US. It is anticipated that better economic conditions will help make the high-end tequila category make a comeback.
Mexico has witnessed a sharp decline of 4% in tequila volumes in the first half of 2023 meanwhile, agave based spirits are taking a different road in multiple markets excluding North America. The category expansion happened across the world’s top 20 beverage alcohol markets including the US and recorded a substantial growth in number of them. Some of the factors that caused the same were the increase in tequila preference as a quality product in Spain and the onset of on-trade in China.
Meanwhile in India, there has been a growing respect for locally grown and made agave which led to doubling of volume sales in 2023 as compared to 2022. The UK experienced a rather crucial change that has turned the whole image of agave across the country wherein there is an increase in the premium category of tequila while the traditional tequila-shot consumption faces a low. Asia and other places outside the US have boosted agave’s growth due to their increasing appreciation for unique cocktails, experiences and Mexican culture. The coming back of duty-free stations post pandemic have also helped in the revival of tourism as well as on-trade across these countries.
The nine ROW markets – the UK, Spain, Australia, China, France, Japan, Italy, Germany and Poland and their sales compared to that of the US and Mexico depict luxury tequila’s potential in terms of profitability due to the fact that the US and Mexico sell 25 times more than what the ROW markets do. If brand owners continue to provide what they’re selling – good quality and larger quantity in the higher price category, agave owners will see a remarkable difference. It is essentially a duty for companies to recreate a vision for their global brand strategies and the demand continues to be moderate in the US and lower volume sales in Mexico ; their future would depend on a vast yet diverse group of markets.
