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Jessica’s Journey – Epic Marketing or Sauza History Lesson?

Epic Marketing or Sauza History Lesson?

You Be the Judge

Part 3 in Jessica’s Epic Journey

By Jessica Arent, Tequila Aficionado Contributor

Sauza History, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyMy second day in Mexico was focused on the product and team brainstorming for a market launch. Believe me when I say Mel Gibson’s character in “What Women Want” wasn’t so far off in the process of branding and advertising. Total immersion into the product to help identify the audience, and the creativity necessary to capture the attention of the targeted audience can be taxing, especially when the tasting begins before the first cappuccino.

I walked into the meeting feeling the weight of travel, the mess of humidity, and trying to pull myself together. Guadalajara has a humid climate and the morning had already proven challenging with the struggle to tame my ever-frizzing hair. If you have ever attempted to straighten and smooth naturally curly hair in humid climates you know this can be an exercise in futility and frustrating endeavor, and yet we still attempt the battle. It tends to leave you irritable and makes for a difficult start to the day…until there was tequila? For breakfast? No way!!!

Several unmarked bottles sat on the table along with dozens of glasses.

And so the work day began, with a flute of 5-year Anejo in one hand and a double cappuccino in the other. . .

While I will not bore you with the details of the work day and the brainstorming that went into it, I will say that I felt like I consumed more tequila on this day than I have in all my years of drinking! 5-year, Plata, Reposado, 7-year…

Glass after glass, note after note…

It’s a tough job, but someone has to do it.

What?! It’s work!!

The truth is, while an extraordinary team, the incredible opportunity to work side by side with Jaime Sauza, and garner some of his knowledge and the rich family history that is his in the world of tequila, was without a doubt an incredible experience, and it was exactly this way that I spent the work day, collaborating with this extraordinary man…

Sauza History

Sauza History, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyOriginally considered “Mexican Moonshine”, the poor man’s drink, Don Cenobio Sauza recognized opportunity early on(“Don” makes you think of the Godfather, doesn’t it?) In 1873 Don Cenobio Sauza founded Sauza Tequila at “La Perseverancia” distillery. He was the first distiller to call the spirit produced from the blue agave plant “tequila”, and the first to export the drink to the United States.

The Story goes like this….

Don Cenobio Sauza was born on a farm in Jalisco, Mexico. He was the third child of Hilario Sauza and Doña Margarita Madrigal Navarro. He worked on his father’s farm along with his siblings Adelaida, Juana, Fernanda, Luis and Herminia until he was sixteen. In 1858 Cenobio traveled to Tequila to visit his cousin Ramon Corona Madrigal. Enamored with the countryside and the rich soil, Cenobio settled in Tequila and got a job working at the distillery of José Antonio Gómez Cuervo. There he learned how to farm agave and distill mezcal-tequila.

Cenobio began to export mezcal-tequila from Tequila to other parts of the country. In 1870, no longer content to just sell, Sauza leased the “La Gallardeña” distillery from Lazaro Gallardo. Sauza saw great success, and three years later, on September 1, 1873 , purchased the “La Antigua Cruz” (The Old Cross) distillery (the oldest registered tequila distillery, founded in 1805 by José Maria Castañeda) from Don Felix Lopez. The transaction equated to 5,000 pesos and he promptly renamed it “La Perseverancia” (Perseverance).The former employee of Cuervo had successfully founded Sauza Tequila and become one of Cuervo’s great rivals.

In 1873 Sauza was the first to export tequila to the United States; crossing through the border at El Paso del Norte (present day Ciudad Juarez) carrying three casks and six jugs of his mezcal-tequila. This was the beginning of the export market for tequila.

The arrival of the railroad in Tequila, Jalisco, increased Sauza’s business and in 1889 he purchased the “La Gallardeña” distillery from Lazaro Gallardo. That same year he purchased the “Hacienda de San Martin de las Cañas”. This became Sauza’s headquarters and was simply known as “La Hacienda Cenobio”. Here he planted more than 2 million agave and started producing an estimated 800 casks of tequila per year. He purchased and sold thirteen more distilleries and numerous fields of agave, always working at least three at a time in order to remain the leader in tequila production and sales. Don Cenobio is credited with determining that the blue agave was the best agave for tequila in the 1890. Obviously the rest followed suit.

Sauza History, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyDon Cenobio’s son, Don Eladio Sauza, was born in Tequila in 1883. At age 20 Eladio moved to Tecolotlan to take charge of his father’s distillery, “La Hacienda La Labor”. It was there that he learned the business of producing and selling tequila. Later, he moved to Mazatlán, a major port in the Northeastern part of Mexico, to establish a Sauza Tequila distribution center in order to increase exportation.

Upon Don Cenobio’s death in 1909, Eladio returned to Guadalajara to mourn his father and to take control of the Sauza Tequila Empire. Shortly thereafter, the Mexican Revolution threatened to expropriate Eladio’s business and farmland. During the Revolution, Eladio rallied patriotic sentiment and helped to establish tequila as the official spirit of Mexico.

Eladio modernized and expanded the family business by opening branches in Monterrey and Mexico City, as well as a concession in Spain. When Don Eladio Sauza died at the age of 63 on July 22, 1946, he left the Sauza Tequila business to his firstborn son, Francisco Javier Sauza

The Third Generation is Born

Sauza History, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyFrancisco Javier Sauza was born in Tecolotlan, Mexico on December 8, 1903 to Don Eladio Sauza and Doña Silveria Mora Enriquez. Francisco Javier Sauza, like his father, was raised on tequila, and in the family tradition of his father and his grandfather he too grew to become part of the family legacy.

When Javier Sauza took over Tequila Sauza, shortly before his father’s death in 1946, he began at once to change the image of tequila from a “drink of the campesinos” to a refined spirit of the upper classes. His competitors scoffed when he redesigned the bottles and labels for a more tasteful look and began to age some of the tequila in wooden barrels for a smoother taste and color.  He took his product to fairs and expositions throughout Mexico, the United States, and Europe, and promoted it as “the drink of romance.” He also modernized production and transportation systems and built a bottling plant in Guadalajara.

In 1950, Francisco Javier added the Sauza Hornitos brand to the Sauza family of tequila. In 1963, he created Sauza Conmemorativo, a tequila that commemorated the 90th anniversary of the La Perseverancia distillery.

In 1973, to celebrate 100 years since the founding of the La Perseverancia distillery, Sauza created a specially aged tequila that he presented in a limited edition, green ceramic bottle. He called his creation Tres Generaciones in honor of the three generations that had produced Sauza Tequila: Don Cenobio, Don Eladio and Don Francisco Javier.

Traveling throughout Europe and Asia, Sauza grew concerned about the number of “pseudo-tequilas” being produced. Working with other tequila producers from Jalisco, Francisco lobbied President Jose Lopez Portillo saying, “Tequila is the only one made in the State of Jalisco, Mexico.” On December 9, 1974 the Label of Integrity decree stated that true tequila only came from the State of Jalisco.

Sauza History, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyFrancisco Javier continued his father and grandfather’s legacy, but in 1988, for personal reasons, he decided to sell the Sauza Tequila business to Mexican brandy producer Pedro Domecq. The tequilas Sauza innovated – Sauza, Hornitos, Tres Generaciones – are still in production. Today Sauza owns about 300 agave plantations and is the second largest tequila manufacturer in the world.

The Fifth Generation

And here I was, spending my day working side by side with Jaime Sauza, the great, great grandson of Cenobio Sauza, getting the education of a lifetime in tequila. It just doesn’t get much better than this.

Or does it?

Well, that’s another segment anyway.

The end of the day had me returning to the hotel to change into cocktail attire for the evening ahead. Still wrestling with the humidity and the unruly mass that was once my hair, I managed to pull myself together (after an ice cold shower and having room service deliver a double espresso) and hustle back to the office for a “roof top CATA”.  Stepping into the elevator I smoothed down my dress, and checked my makeup in the reflection of the doors one last time. As the elevator approached the roof, I could hear a Spanish guitar and the tinkling of glasses.

Then the Doors Opened

Sauza History, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyI walked into the most elegant setting I could imagine. A pergola covered the rooftop with climbing bougainvillea in vibrant colors. Elegant wicker seating with crisp white linen cushions was strategically placed for lounging and open conversation. Small teak tables, dressed with glowing candle lanterns and aromatic orchids in purples and whites were the centerpieces of the seating arrangements.

In one corner stood a bar with dozens of amber colored unmarked bottles.  Mike Vernardo, the master mixologist brought in from Austin, Texas, masterfully created artistic libations, served by four beautiful young Mexican women wearing little black dresses and engaging smiles.

The League of Extraordinary “Tequilans”

Sauza History, Mike Vernardo, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyOut across the terrace the sun was setting over Guadalajara, in hues of pinks and oranges and purples and the lights of the city slowly came on.  As I looked around I saw the most beautiful people begin to come in to the party. Elegant, sophisticated women of Guadalajara on the arms of distinguished gentlemen, and as I began to mingle, I came to realize every attendee was a part of the process of the production of Tequila. From the General Director of La Cofradia Distillery, and his wife, to the master bottle cap maker, who works in precious metals of gold, silver and copper to make the cap and label of this emerging product, to the glass bottle designer himself, and their respective wives. Every person that walked into this party had some part in the creation of an extraordinary elixir from Tequila. I felt as though I was in a League of Extraordinary “Tequilans”.

Not long into the evening, Jaime arrived with his beautiful wife, and the party really got started. Charismatic and congenial, Jaime began to expound on the notes and virtues of each of the samplings of the evening. Elaborating on the legs, crown and brilliance of each, he offered his insights on comparisons and values. Although this might sound dry to some, Jaime’s communicated his thoughts congenially with a touch of humor and was entertaining and engaging. Who wouldn’t be mesmerized by a man who can conclude a tequila lesson with a course in popping a champagne cork with his glass stem?

Sauza History, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyIt’s true. . . Jaime is very versatile!

Waiters in white jackets and great big smiles weaved in and out with delicious food pairings that included fresh ceviche in guacamole sauce served in shot glasses, miniature ranchero tacos, and Ahi tartar tostadas.  The menu was created exclusively by Josue Banuelos for the tequilas we tasted that evening. Mike mixed incredibly creative concoctions of epic proportions out of recipes specifically designed around this tequila, and a joyful mood of what could only be described as “success” filled the air.

I think we all knew we were on to something extraordinary, something epic…

This Cinderella turned in her dancing shoes and cocktail dress for pajamas and a nightcap not long before midnight. My nightcap was a special “gift” given to me by my new friend Jaime.  I fell in love with this dream libation after one sip. An unlikely recipe, this “moonshine” (let’s face it, isn’t it really “moonshine” until it has a NOM, label, and is legal the eyes of the CRT?) takes you to Italy and Mexico at the same time in a seamless blend of liquid perfection.

I cannot tell you more yet, but I can tell you it was the perfect finish to my day.

I closed my eyes in anticipation of the next day and the adventure that lay in before me and drifted off to dreamland.


 

Read the continuation of Jessica’s Journey coming soon!

 

jessica Arent, Sauza History, tequila, jessica arent, tequila aficionado, la cofradia, jaime sauza, cuervo, distillery, wine, dobecq, brandyJessica Arent has spent her career steeped in the Hispanic culture. Passionate about the Latin culture and experiencing roles that have taken her from television to digital marketing throughout the United States and Mexico, Jessica’s passion for Mexico runs in her blood. An accomplished writer, Mexico is where her heart lives and is the focus of her work and writing.  Specializing in marketing Hispanic based products and services, Jessica will tell you there are few people in the world or places she has traveled, from Asia to Europe and in between, who compare to the Mexican culture.  Building websites such as ALL ABOUT MEXICO and fostering the marketing endeavors of a number of tequila products, to name a few, Jessica sets out to inspire the world around her, one person, one relationship at a time, to know and understand the culture she calls home.  Jessica is a partner at Intermountain Media, LLC, the Communications and Media Director of Terra Energy Resources Corp, and shares other travel and tequila adventures on her blog, Jessica’s Mexico.

 

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Craft Tequila–WTF Does THAT Mean? Part 2

Blurred Lines

Throughout Part 1, we employed the use of more adjectives and descriptors to define, describe and distinguish one booze from another in the same category, as well as to give the illusion that it is actually closer to another booze in the leading categories.

Words like award-winning, artisanal, small-run, limited-production, hand-crafted, and boutique are reused over and over.  So are micro-distilled, limited edition, small batch, small lot, organic (which we’ll cover in-depth in a future article), single village, homespun, authentic, small-lot, prestige, signature, high end and reserve.

They all have real core meanings, but because we see them repeatedly in ads, billboards, packaging, shelf talkers and point of sale (POS) materials, the lines between meaning and true definitions get blurred.

Has anyone actually ever been to Los Camachines, where Gran Centenario is made?

Has anyone actually ever been to Los Camachines, where Gran Centenario is made?]

For instance, the definition of the word premium as defined by the Distilled Spirits Council of the United States (DISCUS) is actually a pricing term.  To the average consumer, however, it has come to mean quality.  And when consumers’ buying habits change and trade up, it has become known as premiumization.

There’s no chance of spirits marketers discontinuing the use of the Tequila Marketing Myth of borrowing benefits any time soon.  How, then, do we really define and measure a craft tequila?

We’ll show you how in a moment, but let’s get two things straight right here–

Remember Fact #1?  Tequila belongs in Mexico.

Though some American micro-distilleries have attempted to distill small batches of agave spirits, it has proven difficult and labor intensive due to it being produced from a plant that takes years to mature as opposed to grains, hops, and grapes that yield more frequent harvests.

It would be silly to define and measure craft tequila in ways that relate to wine, beer and other spirits created in the United States and abroad.  There may be no boundaries in spirits marketing, but to impose limits on the number of barrels, bottles and cases manufactured and sold by a tequila distillery in order to measure a craft product would have no jurisdiction whatsoever in Mexico.  Secondly–

There Is No Backpedaling

The Beer Wench, Ashley Routson said it best when interviewed for this article:

“No one wants to fault the big guys for being successful–that is not what this argument is about.  My main question is–how big is too big?  And as long as a company stays independently-owned, does that mean it will always be craft?”

Indeed, both the craft beer and spirits segments are growing at such a fast rate, that the Brewer’s Association has changed its definition multiple times.   This has allowed the burgeoning brewers more room to expand.  And as spirits writer, Wayne Curtis, discusses in this article from The Atlantic, the alarming growth rate of small distilleries is having an effect on the quality of the finished craft product due to a shortage of experienced distillers.

As a consequence of this exponential growth, in both the craft beer and craft spirits categories, the process–the art form itself–is getting watered down.

*Rant Alert!*

Let’s face it–

No backpedaling!

No backpedaling!

No one gets into the tequila business to be a failure.  Everyone wants to be on top.  And once you get there, the challenge is to stay on top.  We know how arduous the tequila hero’s journey is.

No one with a business plan ever said, “I’m going to mass produce my lousy tequila and once I’ve flooded the shelves with my swill and lost market share, I’m going to distill a tequila the old fashioned way.”

Don’t pretend to continue to still make your tequila like you have over the past 250 years, either.  You are not that home based family operation still harvesting agaves by mule and macerating piñas with a tahona, any more.  That family’s history was forgotten when the brand was sold.

And just because you build a separate, smaller facility on your distillery property to produce a more labor intensive line (and even petition to do so under another NOM number!) when you have never attempted to do so in the first place, does not make your more expensive line a craft tequila.

Moreover, just because you happen to be a colossal consumer of agave, still being emulated for your unique style of 80’s spirits marketing, and prefer to see things differently, don’t expect the rest of us to swallow your slant.

The Craft Tequila Gauntlet

El Tesoro handmade tequila.

El Tesoro handmade tequila.

Following are some tips and suggestions that may help guide you in making more informed decisions when selecting, defining and measuring a craft tequila.

#1:  NOM list

By Mexican law, every tequila must display a number that corresponds to the legal representative, tequila producer or distillery in which it was produced.  Tracing that number to the CRT’s list of distilleries, you can discover what other brands are manufactured under that specific number, and presumably, in that specific factory.

Logic dictates that the fewer labels a fabrica (factory) produces means more care should be taken with its one or two flagship brands.  Logic also dictates the opposite when you see many different brands appearing under a particular NOM number.

Whether the distillery produces only a few lines, or many contract brands for others, is not necessarily a sign of the tequila’s craftiness or quality, but it’s a start.

You can view and download the most recent NOM lists from our website here.

#2:  Pedigree

Don Felipe Camarena

Don Felipe Camarena

Taking a pointer from panel expert, Chriz Zarus’ now industry classic article, “Change is at Hand for the Tequila Market, Part II,” a craft brand with a good chance of survival in the market will be one that “You, your distillery, and your brand have generations of lineage.”

Meet-the-Maker dinner pairings, industry meetings and on-premise tastings showcasing a craft tequila will more than likely feature the brand owner or the master distiller behind the brand.

In some cases, a well respected Brand Ambassador (not the gal or guy with the tight t-shirt!) will stand in for the owner if there is a scheduling conflict.

Again, this is not a guarantee of craftiness or quality, but most family owned brands will stand behind (or in front) of their tequila with pride.

#3:  Distillery ownership/partnership/co-op

Another tip from Zarus’ treatise that could be useful in determining whether a craft tequila will be successful or not is, “Your company does…own at least a portion of the distillery that produces your product.”

This was successfully accomplished by the owners of Suerte Tequila, one of the few still produced with a tahona (milling stone).  In order to ensure the quality of their tequila and to regulate the brand’s eventual growth, Lance Sokol and Laurence Spiewak purchased the distillery.

Does your craft tequila have some skin in the game?  Most good ones do and will proudly make that information public.

#4:  Agave and land ownership

Similar to #3 above, some craft brands are owned by families with ties to the land and own their own agave.  In some instances, they may or may not own all or a portion of the distillery where they produce their tequila.

In the midst of this current agave shortage, this one asset could make or break a craft brand.  This information should be readily available in POS material, but is also not a guarantee of quality or craftiness.

#5:  Use of a Diffuser

While considered a legitimate tool in tequila production efficiency and has the full blessing of the CRT, it is a dead give away that shortcuts are being taken.

As noted agave ethno-botanist, Ana Valenzuela so succinctly declared in this open letter

“…prohibir el uso de difusores (hidrólisis de jugos de agave) que les quita “el alma” (el sabor a agave cocido) a nuestros destilados, únicos en el mundo por su complejidad aromatic y de sabores.”

[“…to prohibit the use of diffusers (in hydrolysis of agave juices) that takes the “soul” (the flavor of baked agave) out of our native distillates, singular in the world for its complexities of aromas and flavors.”]

El Tesoro's tahona, still in use.

El Tesoro’s tahona, still in use.

This is also in keeping with Zarus’ definition of preserving the process as the art form or craft outlined in Part 1.

Using a diffuser is a closely guarded secret by most mid-sized to large distilleries and hard to spot.  You can read more about them here.

#6:  Organic

If there are any products that deserve to be described with the aforementioned adjectives that spirits marketers are freely throwing around these days to denote a handcrafted tequila, mezcal, or other agave distillate, they are in the organic segment.

Stringent regulations are required in both farm to distillery, and then from factory to bottle, to be given the designation organic and the permission to use the USDA seal that appears prominently on the labels.

By virtue of being organic, the process is considered much more natural and is inherently small batched.

But, not every brand has the budget to become a certified organic tequila.  In addition, some brands may simply not see the value of being certified as organic, especially since some organic certifying agencies have been looked upon distrustfully in recent years.

Still, it could arguably be the most reliable indicator of a craft agave distillate.

#7:  Transparency

This might be the toughest test of all.

As we mentioned above, many brands prefer to play their cards close to the vest.  By the same token, many family owned brands are fiercely proud of their origins and will gladly tell you the truth, the whole truth, and nothing but the truth.

Is your craft tequila brand willing to tell you their story, or just tell you a story?

Many of the more popular craft tequila brands are helmed by creators who are delightfully flamboyant and outspoken, as well.

 Craft by Any Other Name

As our reader in Part 1 stated, the meaning of craft is “all over the place” and then some.

Spirits marketers using their powers for evil.

Spirits marketers using their powers for evil.

With mixology being the leading trend driving the spirits industry and demand for better ingredients on the rise, this means quality tequila is essential for those creating crafted cocktails (there’s that word again!).

But, with  the invention of the wildly popular michelada cocktail, a margarita (which is the favorite way Americans consume tequila) served with a beer bottle upside down in a margarita glass, and chilled tequila on tap, there will surely be more cross pollination between adult beverage categories.

We’ve already seen this with tequila brands selling their used aging barrels to small brewers to create signature craft beers, as well as tequila aged in barrels bought from other brand named spirits.

This will only lead to even more crossovers between categories caused by inspired spirits marketers, PR firms, uninformed spirits journalists, and multinational corporations.  Borrowing benefits has been the norm for some time.

There will always be those who deliberately hide the truth or feed false information to the media and practice opacity.  We can’t control what they will say and do.

The key is to become educated and informed about a tequila’s recipe and process.  Using the Craft Tequila Gauntlet above can certainly help in making the right choices.

 

 

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Change is at Hand for the Tequila Market, Part I

tequila market, masa azulPart I of II

Written by Chris Zarus of TequilaRack

Tequila Brands and Producers Have Already Sailed Into the Sucker Hole

For those new to the expression, a “sucker hole” is a colloquial term referring to a spate of good weather that “suckers” sailors into leaving port just in time for a storm to resume at full force and wreak havoc on the ship and crew.

For both Tequila Brand Owners and producers of a certain size, their ship has already sailed, and the storm is now closing in on them. Some in denial, others looking through rose-colored margarita glasses, still believe they can navigate through to that glimmer of light on the horizon. However, the perfect storm of doom looms just past the horizon of hope, and will soon envelope and destroy most, if not all, in its wake.

Oh, and that’s the good news. The bad news is that only a few of the big and the very nimble will survive.

This is because of a number of factors, primarily that too many of us bought in to the Yankelovich and similar studies that declared premium and above 100% Agave Tequila brands as the next big thing.

While the premises of these market premonitions were undoubtedly true, too many of us jumped headfirst into the juice just before the world economic decline. Six hundred brands have turned into 1200 brands in less than five years. The growth of the market has been dramatic compared with other distilled spirits, yet, it’s still relatively small, ranked only 4th in US volume. It has not grown fast enough to accommodate all of the entries into the field.

Resistance is Futile – Change is at Hand for the Tequila Market

train wreckThe Gravy Train Wreck Ahead

I’m sure that for many of you, in just reading the title of this article, your blood pressure has escalated, and you may already be misdirecting your anger at the author.

For others who have experienced the many similar economic paths to consolidation in the global beverage industry, you have already accepted that change has to occur, and you will soon better understand and appreciate the math behind what I am about to lay out, and why everything I’m about to outline here will happen in due course.

For those of you who have your personal fortunes riding on the Tequila Train, both prominence and profit may still seem to be so close that you think you can see the light at the end of the tunnel, or beyond the next bend. But, I’m sorry to say that for most of us in the biz, the light at the end of the tunnel is that of an oncoming locomotive. This will be a catastrophic collision, albeit in slow motion, that will drain your resources and your resolve.

iwsrWhat can be learned from the Russians? (Excerpted from JustDrinks.com)

The global economic crisis has had a significant impact on the Russian spirits market, changing market dynamics and briefly halting the much-lauded premiumisation trend, according to current research.

A recently released report from the International Wine and Spirit Research (IWSR) on Russia’s spirits market claims that the downturn has also led to “…disruptions across the supply chain, with many suppliers and distributors going bankrupt or halting production. For healthier companies, however, it has presented an opening to establish their brands and take market share…”

cloud liningThe Silver Tequila Clouds have a very Dark Lining (Excerpted from Global market review of Tequila – forecasts to 2013 www.researchandmarkets.com )

The history of the Tequila industry has been one of boom and bust. Sales rose during the 1940’s only to collapse again in the mid-50’s. Export sales rose steadily from the 1960’s onward, although domestic sales fell sharply in the 1980’s due again to an economic slump, and the severe Mexican economic crisis of the early 1980’s resulted in plummeting sales.

The market was again disrupted by a critical shortage of Agave beginning in the late ’90’s, which served to hold back the category’s international development as brand owners were forced to divert limited supplies to the core US market, and quality perceptions were damaged as some manufacturers moved from 100% to 51% (Mixto) Agave products.

Today, that dynamic is in reverse, and the market is in oversupply. More and more 100% Agave products are coming into the market. This is helping to raise quality perceptions, and in turn, demand is surging not only in core Mexican and US markets but across a number of other countries.

The outlook for the category has rarely been better, and Casa Noble Tequila president and COO David Ravandi commented, “Tequila is entering a stage of consolidation in the world markets. It is no longer a fad. The fact that 100% Agave Tequila exports have increased tremendously over the last two years is extremely positive for the product’s outlook in the years to come.”

US Tequila Importation is a Sucker Bet

tequila history, santa fe“My cousin will make the best Tequila for you Mr. Gringo”

“So, my friend, you want a great Tequila brand? We will make it for you. Just fifty percent cash up front to start the process.”

Unfortunately, far too many have fallen for this old gag. Relying heavily on the forecasting reports of the early 2000’s that suggested that luxury Tequila would be the next big spirits category after vodka.

With dollar signs in their eyes, the believers drank the Tequila Kool-Aid, most of them spending way too much to buy a brand, custom molded bottles, etc. But the worst part was that this left little if any money for marketing. Many did not even understand brand marketing inflation was happening right under their noses.

It had started soon after Patron hit 100,000 cases in volume in 2001, and the cost to market a Tequila brand in the US went from $1 to $10M per year. Today it takes at least $20M per year just to play in the same ballpark as Patron’s $50M plus, Sauza’s $35M plus, and Cuervo’s $30M plus marketing budgets.

Who could have predicted that a “realistic” business plan for the next successful ultra-premium Tequila brand calling for only 10,000 cases in the first year would end in it’s investors taking a bath?

The problem with this equation is three-fold:

1) Pricing: Unlike vodka and white rum, 100% Agave Tequila is just too expensive to produce and bottle in Mexico. Unless, like rum, vodka and mixto Tequila, it is able to be shipped in bulk and bottled near the final consumer, the cost involved with 100% Agave Tequila is always going to be too high to attain critical volume and profit levels.

2) Volume: US mass volumes are best when a spirits category is between $9.99-29.99/750ml. One hundred percent Agave Tequila is currently profitable only at the upper ranges when higher volumes are attained.

3) Distribution: The US “3-Tier” Distribution System is at best an oligopoly, and 19 states run a monopoly. Of the 1200 plus Tequila brands, want to guess how many they want to carry? Well, after the top 20, you are very lucky to be “special order only”. If you are fortunate enough to live in the states of California or Arizona, where one can be both the importer and distributor, you will find yourself driving your precious Tequila brand around to each account in your car.

Without product volumes or market clout, you will be hard pressed to get even an appointment, let alone a vender number with the chain restaurants and grocery stores. These major chain stores like Chili’s, Chevy’s, Costco, Kroger, etc., drive at least 85% of the combined volume in all but the control states. Without access to the chains, your market becomes the handful of privately owned, “Mom & Pop” accounts that usually know that small independent distributors are easy prey for bending the law on consignment, stringing out payments, or not paying at all.

While driving your own brand around certainly makes time for the personal touch and focus, these hand-selling efforts prove to be the most inefficient ways to distribute one Tequila brand. Your glass ceiling to fame and fortune becomes that next level of chain distribution that can only be had by a state-wide delivery system of the large wholesale distributor.

With Tequila segment Pricing, Volume and Distribution all against you, one will need to have a lot more money than the brands of the past in order to simply survive in the US.

Tanks-a-lot for Nothing

Call the tank maker and raise your stocks of liquid now!

no masUnfortunately, most of the mid-sized Tequila distilleries have bought into the notion that Agave prices will go up in the very near future. They base this notion on the boom and bust cycle of the past, and like Lehman Brothers, believe that they have successfully timed the market.

Greedily, many producers are now mortgaged to the hilt in order to produce all the Tequila that they possibly can afford to store in stainless tanks or wooden barrels. Fear of the impending Agave price increase that has yet to happen (and may not for many, many years) has seemingly forced them all into a squirrel-like stockpiling frenzy.

Are they storing Blanco, like acorns, for the hard winter ahead? These stored nuts of liquid demise are in reality winds conspiring to produce the perfect storm for all but the most financially secure and/or nimble producers.

Copyright 2010 International Tasting Group (ITG), All rights reserved. Unless otherwise noted, ITG is the legal copyright holder of the material on our blog and it may not be used, reprinted, or published without our written consent.

Links

SPIRITS TRENDS

U.S. Spirits Market 2008, Gross Revenues by Price Category

http://www.discus.org/pdf/2009IndustryBriefing.pdf (This is the most recent report by DISCUS for 2009. Tequila volume is still listed as 4th.)

http://www.thefreelibrary.com/Spirits+fast+track+brands.-a0144204154 (shows Patrón reaching 119K cases in volume in 2001.)

http://archive.cyark.org/2012-understanding-the-maya-calendars-blog

http://www.forgottenagesresearch.com/index.htm

http://www.nostradamus.org

http://www.oceanfreightusa.com/topic_impg.php?ch=19 (Bonded warehouses.)

http://dsc.discovery.com/news/2009/02/09/tequila-agriculture.html (agave farmers)

http://www.yankelovich.com/ (state of the consumer)

tequilarack

Originally posted October 1, 2010 by Chris Zarus of TequilaRack.  This is considered a standard in the industry and is even more relevant today.

Please visit TequilaRack, a member of the Tequila Aficionado Flight of Sites.

 

 

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It gives them away every time.

A controversial sound bite from my upcoming dynamic article, The Evolution of The Tequila Bar, featuring Mercado restaurant and bar in the heart of Santa Monica, CA.

Marco Antonio Ramos Monterrubio, the former manager of Mercado, reveals the one tequila fact that most don’t want to admit.

Explore this and the one tequila fact that most don’t want to admit with Mike Morales and Marco Antonio Ramos Monterrubio at Mercado in Santa Monica.  Click here to read more!

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