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.
By Michael Sherer
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, 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 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.
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.
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)
|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%|
|Total Leading Brands||4,866||5,412||11.2%|
(*) 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.
Mexican cerveza continues to grow faster than beer from any other country or any other segment, for that matter. Category leader Corona saw growth of about 9% last year, nearly double that of the import category as a whole. While that was slow compared to heady 30% growth a few years ago, it accomplished it in the face of a price hike and the slow economy.
Corona’s success is a credit to its consistent strategy over the past two decades.
Brown-Forman’s Pepe Lopez Tequila is using a “Pepe Loves Rita” theme in its p-o-s this spring.
“We don’t really look at or market our products as Mexican,” said Don Mann, Modelo product director at Gambrinus Company. “The brand leverages space between imports and domestics. It has the cachet of an import, but is more approachable than other imports, so it has broad consumer acceptance as a result.”
New television and radio spots that kick off this month and a full promotional program are on tap for the brand this year. Corona Light will get a lot more focus with its own series of ads and more attention in family promotions.
“Cinco de Mayo is an opportunity to get a jump on the summer selling season,” said Bill Hackett, president of Barton Beers, Ltd., Corona’s other importer. “We have a huge opportunity with Corona Light. The growing light beer market is a 45 share of the beer industry. Light beer is still under a 10 share of the import segment. That’s a huge opportunity for retailers as well.”
The other Modelo products — Negra Modelo, Modelo Especial and Pacifico — also are well supported at retail with programs scheduled throughout the year.
This past January, Robert F. Kennedy Jr. (left) and Alec Baldwin participated in the Gran Centenario Tequila snowshoe and tobogganing race at the Squaw Valley Sports Invitational in Squaw Valley, CA. The event was part of a weekend of festivities benefiting Kennedy’s Waterkeeper Alliance, a grassroots organization dedicated to preserving and protecting water from polluters.
Mexican brands imported by Labatt USA also are experiencing strong growth. Tecate is now the number-four import in the country even though it is targeted squarely at Mexican-Americans. Last year the brand went through a transition as it shifted to programs designed to appeal to a younger generation while not alienating traditional, first-generation Mexican-American consumers.
The brand is using CART racing, soccer and music to bridge the generations. Tecate’s CART program is even bi-lingual to give it broader appeal.
For Cinco de Mayo, the brand has come up with a “Celebracion las Cincos de Mayos,” a play-on-words in which “las Cincos” become five senoritas on point-of-sale materials flirting with a guy named Mayo. The materials also highlight Tecate’s five package sizes.
A more edgy and contemporary ad campaign kicked off in January. The brand also is sponsoring a lot of new up-and-coming Mexican bands here, using music to reach new consumers.
Dos Equis is aimed at a broader market and will continue the “Dos Equis Zone” program it began a few years ago. The program encourages consumers to experience the brand in its native environment, tying into travel destinations like Cancun.
Corona Extra and Corona Light are positioning themselves as “The Drinko for Cinco” in p-o-s materials.
For Cinco de Mayo, the brand is offering an all-in-one Fiesta Pack of beer, chips and salsa at a special price. This summer, Dos Equis will promote “liquid” sports like water skiing, surfing and windsurfing.
Sol continues to focus its effort on core markets in the southwest and southern California, but will likely also get support in a few emerging markets in the northeast.
Brandies and Cordials
Kahlúa, one of the biggest brands in the world, saw its sales decline somewhat last year. The brand is in the middle of a strategic review of its global positioning and will likely develop new programs later this year to renew consumer interest in the brand.
In the meantime, it is taking advantage of the revival of classic cocktails by promoting three drinks that helped make it famous — the White Russian, Black Russian and Kahlúa and milk or cream. Allied-Domecq’s “first choice” sales teams will be working with on-premise accounts to increase demand which is expected to have a spillover effect on off-premise sales as well.
Allied Domecq also is focusing efforts on a superpremium line extension called Kahlúa Especial, which is said to be hand-crafted and carefully blended for extra smoothness.
Other coffee liqueurs from Mexico are capitalizing in off-premise accounts on Kahlua’s popularity. Kamora from Jim Beam, Sabroso from Barton Brands, and Copa De Oro from Heaven Hill all offer a price alternative to the category leader. Consumers often look for value brands like these at retail after trying a well-known brand on-premise.
Brandy is another spirit from Mexico that is sometimes overlooked. Surprisingly, brandy outsells tequila by about a six-to-one margin in Mexico.
One of the most popular spirits brands in the world, Kahlúa is promoting The White Russian (as well as Black Russian and Kahlúa and milk/cream) in a variety of p-o-s materials.
Presidente, for example, is the number-one selling brandy in the world and the top spirits brand in Mexico. Off-premise, the brand’s focus has been on Mexican-Americans. An aggressive on-premise program, however, will likely broaden Presidente’s appeal at retail. Consumers are slowly being introduced to the brand in cocktails like the Presidente Margarita at Chili’s Grill and Bar.
“As consumers start to encounter the brand on-premise, they will begin to see and ask for it off-premise,” said Johnson.
The brand also will repeat a joint promotion with Sauza in September on Mexican Independence Day.
Allied-Domecq is counting on increased awareness of Presidente also helping premium Don Pedro brandy and the ultra-premium Azteca de Oro, aged 12 years in the Spanish solera system.
While Cinco de Mayo is a good time to merchandise all these products from Mexico, their popularity with consumers means they’ll sell year round with a little attention from you. *
What’s With The Worm?
Some consumers may look for a worm in the tequila they buy or wonder why it doesn’t have one. In reality, only certain brands of mezcal are sold with worms in the bottle. The stuff of frat houses legends, mezcal isn’t tequila. But in one of those oddities in the spirits industry, all tequilas are mezcals.
Mezcal refers to any spirit made with some type of agave plant. Tequila, like champagne or cognac, must conform to certain standards to carry the name. Tequila must be made with at least 51% blue agave from a certain area around Jalisco, Mexico.
Mezcal, on the other hand, can be made with a variety of different agave types. In all cases, it is made with 100% agave, and usually the agave is roasted in a pit for several days, giving it a smoky characteristic somewhat like Scotch, also giving it its reputation for being “rough.” (Modern tequila production often uses large autoclaves to steam the agave piña instead.) The roasted agave is then stone ground to release its juice for fermentation.
Most mezcal production occurs around Oaxaca, south of Jalisco. Mezcal producers liken their product to armagnac, a product different in character from cognac, but not quality. There are different stories about how the worm got into the bottle. The most commonly accepted is that around 1942, an artist named Jacobo Lozano Paez started a small bottling plant and initially bought mezcal from a family in Oaxaca.
By 1950, Paez was a self-proclaimed connoisseur of mezcal and noticed that batches made with agave heavily infested with agave worms tasted much different. It gave him the idea to market his mezcal with a worm in the bottle. Consumers began to accept the worm as proof of alcohol content.
Like tequila, mezcals come in different types: blanco, bottled immediately after distillation; madurado, similar to reposado tequila; con gusano (“with the worm”); añejo, aged in oak for at least six months and usually from one to four years; and triple-distilled minero, often considered the best. Only a few brands, such as Barton’s Monte Alban, are still bottled with a worm.
From the March/April 2003 issue of Beverage Dynamics.