It’s The End of the Tequila World As We Know It…and I Feel Fine Part II

Blanco, and perhaps to some extent Reposado 100% Agave Tequila styles, will begin to follow the pricing of other mainstream spirits, vodka and rum. In this $9.99 – 29.99 price category volumes will grow. The big players are already in this segment with Patrón, Cazadores, Cuervo’s Azul and 1800, Sauza’s Hornitos, Brown-Forman’s El Jimador, and the new Gallo entry, Camarena. This category with be dominated by the big manufacturers that have the distribution muscle and can afford the promotions support of at least $10M per year.

Sure, there will be other Blanco’s in the stores, but unless they are store supported as a “house brand,” volumes will be relegated to 5-10% of the segment. Why buy a $39.00 Blanco when you can get an Añejo at the same price? Yes, some will continue to buy Patrón Blanco, but the pricing will fall to that of comparable high-end vodkas like Grey Goose and Belvedere, at least a $10 discount from today’s price, about $29.99 per 750ml in the volume liquor and chain grocery stores.

Añejo, and extra-aged products, will begin to command the ultra premium price points and above. Moreover, Añejo’s (Tequila and Mezcal) will begin to follow pricing similar to Irish and Scotch Whiskey, with its own price segmentation based on perceived quality and marketing. This will be the market of the small survivors with the ability to make consistently great, aged craft Tequila.

As the clock ticks down to the end of 2012, a new world order is approaching. It may come gradually enough for some that it is hardly noticed until it’s too late. I foresee the slow starving of all but the nimble and mighty Tequila brands, producers and farmers alike.

Some will fight this impending consolidation, I’m sure. But this change will come nonetheless, and it will be a profitable event for the few that survive their trip through the sucker hole. I myself have decided to remain nimble, strapped into my dingy, Riedel in hand, waiting out the storm.

You can read Part I of It’s The End of the Tequila World as we know it…and I Feel Fine by clicking here

Christopher Zarus is CEO of Tequila Rack offering fine tequila products like the one below.

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U.S. Spirits Market 2008, Gross Revenues by Price Category (This is the most recent report by DISCUS for 2009. Tequila volume is still listed as 4th.) (shows Patrón reaching 119K cases in volume in 2001.) (Bonded warehouses.) (agave farmers) (state of the consumer)

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Lisa Pietsch is the Chief Operations Officer of Tequila Aficionado Media, a USAF veteran, a multi-published novelist and freelance writer, a social media marketing consultant, and the mother of two boys. She has a passion for good tequila, foreign languages, and travel in all forms. Lisa currently makes her home in San Antonio, Texas.