Tag Archives: reposado

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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Sipping off the Cuff: Suavecito Reposado

Tequila Aficionado’s Alex Perez and Mike Morales taste and discuss Suavecito Reposado tequila.

Suavecito Reposado

Sipping off the Cuff

Sipping off the Cuff™ began as an audio podcast in 2006 and is Tequila Aficionado’s first and longest running tequila review program. Sipping off the Cuff is broadcast every Friday (and occasionally Tuesdays) on YouTube and TequilaAficionado.com. If you are a Tequila, Mezcal or Sotol brand owner and would like yourproduct(s) reviewed on an upcoming episode of Sipping off the Cuff, please contact Mike@TequilaAficionado.com.  Click here to see all of our Sipping off the Cuff™ programming.

Monday Madness

Monday Madness was created as a blooper by-product of our production process for the Tequila Aficionado exclusive video program, Sipping off the Cuff. When M.A. “Mike” Morales and Alexander “Alex” Perez get together, whether in person or via Skype, to review tequilas for Sipping off the Cuff, something silly is bound to happen.  Rather than present these clips with their reviews, we chose to respect serious viewers’ time and get right to business with each SOTC episode to keep them at ten minutes or less.  The outtakes are often funny and show our silly side, so we chose to share them with you for your amusement, as well as ours, in our Monday Madness video feature.  Monday Madness is the evidence of how very much fun we have doing what we love here at Tequila Aficionado Media.

Catch more of Tequila Aficionado’s Sipping Off The Cuff(tm) on YouTube HERE.

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Sipping off the Cuff: Suavecito Blanco

Suavecito Blanco

Tequila Aficionado’s Alex Perez and Mike Morales taste and discuss Suavecito Blanco tequila.

Suavecito Tequila is produced from mountain grown Agaves containing the highest concentration of sugar possible. it is is 100% Puro de Agave and is combined with the perfect amount of Agave nectar at bottling to produce a Tequila that can be enjoyed straight or in your favorite margarita recipe.

 

Suavecito Blanco

 

 

Find Suavecito Infused Tequilas online at http://suavecitospirits.com/

 

From the Suavecito website:

Mountain Grown

Our Blue Agave is grown in the red soil of the mountains of Jalisco, Mexico. These Highlands are particularly well suited to growing the Suavecito Blue Agaves. Our plants are slightly smaller, contain less water and produce a higher quality sugar.

Distilled Only Once

We start with quality ingredients. We staff a team of growers that regularly test the soil to ensure only the best of growing conditions. Suavecito needs to be distilled only once to produce a smooth and 100% authentic taste.

Rested in American Oak Barrels

Different barrels contribute unique flavors and distinct characteristics. Suavecito is rested in specially selected American Oak barrels to ensure that it’s 100% smooth.

Sipping off the Cuff(tm) began as an audio podcast in 2006 and is Tequila Aficionado’s first and longest running tequila review program. Sipping off the Cuff is broadcast every Friday (and occasionally Tuesdays) on YouTube and TequilaAficionado.com. If you are a Tequila, Mezcal or Sotol brand owner and would like yourproduct(s) reviewed on an upcoming episode of Sipping off the Cuff, please contact Mike@TequilaAficionado.com.

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Sipping off the Cuff: Blue Nectar Reposado

Tequila Aficionado’s Alex Perez and Mike Morales taste and discussBlue Nectar Reposado tequila.

 

Blue Nectar Reposado

Visit Blue Nectar Tequila online.

Sipping off the Cuff(tm) began as an audio podcast in 2006 and is Tequila Aficionado’s first and longest running tequila review program. Sipping off the Cuff is broadcast every Friday (and occasionally Tuesdays) on YouTube and TequilaAficionado.com. If you are a Tequila, Mezcal or Sotol brand owner and would like yourproduct(s) reviewed on an upcoming episode of Sipping off the Cuff, please contact Mike@TequilaAficionado.com. blue nectar, tequila, tequila aficionado

 

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Herradura Coleccion de la Casa Review By Steve Coomes

herradura, Herradura Coleccion de la Casa, Reserva 2013 Cognac Cask Finish Reposado

Herradura Coleccion de la Casa, Reserva 2013 – Cognac Cask Finish Reposado

By Steve Coomes, Tequila Aficionado Contributing Writer

In October, I visited Casa Herradura Tequila distillery, in Amatitan, Jalisco, Mexico, where I and five spirits writers tasted the new Coleccion de la Casa, Reserva 2013 – Cognac Cask Finish Reposado. Aged 11 months in American Oak and finished an additional three months in cognac barrels, the new tequila, released this fall left me both perplexed and intrigued.
After just a few sips, I was challenged to conceive what master distiller Maria Theresa Lara was seeking from the second barrel maturation. Clearly, it wasn’t the common profile of an añejo.

Its tasting notes claim a hint of smoked oak, but it eluded my nose and palate. Agave, however, was well represented, as were some delicate vegetal notes. Though leggy in the glass, the mouthfeel was lean: a quick entry followed by a quick exit. A writer beside me described its finishing as “drying,” which was dead on: neither abrupt and sherry-like, nor lengthy and tequila-like.

Curious about the reposado on which the Cognac Finish was built, I asked if we could taste it, and our hosts happily obliged. The differences were stark. The Cognac Finish lacked most of its cousin’s sweetness and fuller mouthfeel. Where one may imagine a double dose of wood might amp up the vanilla, caramel and cinnamon, all three were somewhat muted.

The trade-off was redolent spice, especially white pepper, an abundance of agave, lightly herbaceous undertones and hints of citrus and pineapple. When we lunched later, its lean profile paired amazingly well with a menu that included raw clams and roasted lamb.

This is a sophisticated tequila, well balanced and nicely structured. It plays no tricks and keeps no secrets. What you get after a few minutes’ rest in the glass is largely what you get 20 minutes later—if you let it rest that long that is. Suggested retail: $89 per 750ml bottle; to be sold in Mexico, United States, El Salvador and Australia.

 

 

stephen coomes, steve coomes,Tequila Aficionado is proud to welcome rising star in tequila and travel journalism, Stephen Coomes, as a Contributing Writer and Reviewer.  His steady gigs include roles as contributing editor for Nation’s Restaurant News (the U.S. restaurant industry’s largest publication), restaurant critic and feature writer for Louisville magazine, feature writer for Edible Louisville and Seafood Business magazines, Kentucky travel and dining contributor for Southern Living, and dining blogger for Insider Louisville. He also writes marketing, PR, web copy and ghostwrites for numerous private clients.  You can visit Steve online at www.stevecoomes.com.

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