How to Survive the Tequila Turmoils of 2018

How to Survive the Tequila Turmoils of 2018 https://wp.me/p3u1xi-5zQ

Whether you’re in the business, a savvy consumer, or just an Average Joe overwhelmed by the hype of agave spirits, how can you ensure that you’ll survive the upcoming tequila turmoils of the rest of this year, and beyond?

We’ll show you how.

But first…

Let’s Review

You’ve heard the news of the current agave crisis that we covered in The Agave Panic of 2018:  Bloodshed on the Streets of Tequila. 

You’ve kept track of the trend since last year when we explained that The Agave Shortage of 2017 is Worse Than We Thought.

If you’re launching agave spirits brands during this time of crisis, we need a short discussion about–

Mega Distributors

Aside from some notable craft brands being swallowed up by corporate distillers, M & A has been the name of the game in the spirits distribution sector, too.

How to Survive the Tequila Turmoils of 2018 https://wp.me/p3u1xi-5zQ

Late November 2017 brought the news that distributor Breakthru Beverage was set to combine with Texas based distributor Republic National Distribution Company to match 2016’s mega-merger of Southern Wine and Spirits with Glazer’s, Inc.

This means that smaller agave spirits labels are in danger of never gaining the attention of these behemoth corporations.

And, if your small batch agave distillate has been promised a slot in the hulking distributors’ newly formed “craft spirits division,” specifically to “incubate” promising brands, my advice…

Don’t Do It!  It’s A Trap!

How to Survive the Tequila Turmoils of 2018 https://wp.me/p3u1xi-5zQ

Whether they’ve promised your juice a small amount of attention, or you’re in the “full book” (entire spirits catalog), these divisions are engineered to give the up-and-coming little guy a false sense of hope–and a false sense of security–that your gem will be distributed nationwide, some day.

Fat chance.  It’ll never happen. Wake up!

These mammoth distributors are in bed with the Big Boys, and won’t lift a finger to help you get the word out or build your brand.

Whatever that friend-of-a-friend-who’s-been-in-the-business-a-long-time-and-you’ve-been-golfing-buddies-forever has pledged to you, these departments are engineered to safely “sit” on your precious tequila or mezcal because it has been deemed a threat to the shelf space of their higher paying bread-and-butter flagships.How to Survive the Tequila Turmoils of 2018 https://wp.me/p3u1xi-5zQ

With the recent pay-for-play scandals that have been in the booze news lately, this technique is tougher to detect.

You’ll still be in the same boat you’re in now, doing all the work yourself.

Instead…

Support Your Local Distributor

Not a day goes by where a rising agave star doesn’t ask us for recommendations on a “good distributor” [There’s an oxymoron!] in any state.

Personally, I hesitate to recommend any particular distributor.  I’m not a big fan of them.  Some will argue that the Three Tier System of distribution in the United States is archaic, and serves only the Big Brands.

That said, small-to-mid sized distributors, in my opinion, will become even more important in the grand scheme of things, especially in light of the next impeding mega-merger between Republic National and Breakthru Beverage.

If you’re lucky enough to find hustlers like agave-centric Glass Bottom Distributors in Southern California, or Creospirits in Arizona, your troubles might be fewer.

On the other hand, if you decide to go with a small wine house, or choose a beer distributor or some other arrangement, you’ll still need to instruct their sales staff on how to sell your agave spirit.

Assume that they are simply order takers and woefully under trained (they are!) on anything other than wine or beer, or what’s “on spiff.”

When instructing these salespeople, speak to them in terms they will understand, and don’t have high expectations.

Maybe, just maybe, they won’t disappoint you too much.

Savvy Consumer

You’re one smart cookie.

Not too many people can pull the wool over your eyes, but…

You’re afraid of falling for the excessive marketing that’s endlessly broadcasted to you from all sides of the tequila aisle.

Relax.How to Survive the Tequila Turmoils of 2018 https://wp.me/p3u1xi-5zQ

We suggest you re-read our 2-part series, Craft Tequila:  WTF Does THAT Mean? Part 1.  And, the guidelines put forth in the Craft Tequila Gauntlet in Part 2.

Add Kosher

While you’re at it, add kosher tequila and mezcal to your arsenal, too.

Don’t laugh.  It’s a billion dollar business.

If Rothschild can release a kosher rose champagne, what’s keeping tequilas and mezcals from doing it, too?

Check out our 4 part series, The BIG Business of Kosher Tequila, Part 1 , Part 2 , Part 3 , Part 4 .

The Average Joe

If you’re just an Average Joe, and even if you’ve done all the aforementioned due diligence, you’re still in danger.
How to Survive the Tequila Turmoils of 2018 https://wp.me/p3u1xi-5zQ

Rather than taking shortcuts in order to meet heavy worldwide demand and risk losing quality, some reputable tequila makers have reportedly stopped distilling temporarily in the hopes that agave prices will level out.

[At this writing, agave prices are at $25 pesos per kilo.]

One industry insider confessed to us, however, that a major brand name tequila had switched completely to using diffusers to produce its tequilas.

Asked whether the owner of this large distillery was concerned that the quality of his juice would suffer, he admitted that he didn’t care.

He defended his position by saying that his tequila had been around for so long, and was moving a significant amount of cases, that consumers would never know the difference, anyway.

To purists, news like this breaks their heart.

To savvy consumers, this deliberate disrespect of the public’s intelligence should raise their hackles.

To the Average Joe, this will make your head spin because you make your buying decisions based mostly on tried and true names that you’ve always trusted.

Mainstay brands that were standouts before being bought by global companies, or invested in by foreigners outside of Mexico, are banking that you’ll fall for their marketing–and, on your ignorance.

Don’t let them!

How to Survive the Tequila Turmoils of 2018 https://wp.me/p3u1xi-5zQ

What Else You Can Do

Support small producers of agave spirits.

The Big Boys will always weather the storm, but a few of the little guys could be out of business over the course of the next five years or so.

In promoting them–and even some of the more popular brands, it seems–expect to pay more at your local bar or liquor store.

Whether the agave crisis is fact, fiction or a fusion of both, the scarcity of a commodity will always drive prices higher.

In this thoughtful article by the non-profit advocacy group, Tequila Interchange Project, here’s what else you can do to prepare for what’s to come–without selling out.

Informed agave spirits consumers should always strive to drink for a greater, and more balanced, agave distillates industry.

Learn all about tequila from field to glass and then get paid to share your love of agave spirits with others! Buy Them Both Now!

Terralta Tequila and Creo Spirits: Behind the Scenes

[*FTC Disclosure: Brands appearing on the Tequila Aficionado Wild Wild West 2017 Tour were vetted as Brand of Promise(c) Nominees and paid a nominal fee to be included.]

The Lay of the Land

The need for small-to-medium sized distributors in every state will become even more important in 2018 to ensure that worthy agave spirit Brands of Promise are not lost in the conglomerate shuffle.

Sensing this demand long before the current trend of mega-mergers, Enrique Ramos, established Creo Commercium Inc (Creo Spirits) in Phoenix, Arizona in 2008.

His current portfolio is stocked with an array of agave spirits, as well Mexican wines and craft beers that are not readily available except at select establishments such as Elvira’s Tequila Cocina & Vino in Tucson.

Hedging Bets

It’s a good bet that that was one of the main reasons Ingeniero Felipe Camarena Curiel, innovator of such remarkably acclaimed and diverse tequilas as Pasote, G4 and Terralta, chose Creo Spirits as his importer and distributor of Terralta in the highly competitive state of Arizona.

Spending countless hours with the man known as “The Mad Genius” of tequila at his state-of-art El Pandillo distillery, Enrique possesses a unique perspective on Felipe Camarena that few folks get the chance to experience.

We caught up with Enrique during the Wild Wild West 2017 Tour at his base of operations in Phoenix.

Here, Ramos divulges the “little things” that Felipe does to add to Terralta’s flavorful profile.

It All Happened by Mistake

Enrique reveals how Felipe Camarena and he established their relationship, and where Terralta is currently available.  He also expresses his views on who chooses to sip Terralta and how these individuals re-calibrate their taste buds through successive tastings.

Personal History

Enrique Ramos, who shares a direct lineage to Pancho Villa, reveals how he got into the business of spirits importation, and what it takes to succeed.

Customer-centric 

Enrique Ramos admits that his greatest allies in the importation/distribution business are his own customers.  And, in the process of taking care of them to best of his abilities, they in turn take care of him.

It’s this kind of customer-centric attitude and attention to detail that will ensure Creo Spirits’–and Terralta’s–success in the long running battle for shelf space.

Learn all about tequila from field to glass and then get paid to share your love of agave spirits with others! Buy Them Both Now!

Rancho La Joya Tequila–Roberto Sanchez del Toro

Passion:  The A Game

To say that Roberto Sanchez del Toro, exclusive importer and brand developer of Rancho La Joya tequila (NOM 1555) has endured adversity would be an understatement.  To say that he has survived his life’s challenges, thus far, with grace and his boyish charm still intact would be putting it mildly.

San Antonio, Texas, resident, Roberto was a young high school student when, due to immigration reasons, he was forced to manage the family’s thriving tamale husk production business while his parents were temporarily out of the country.

Then, as a sophomore at St. Mary’s University, he decided to create his own tequila business only to suffer defeat at the hands of the merciless Texas spirits retail and distribution industries.

Fast forward to 2013…

Roberto Sanchez del Toro, importer of Rancho La Joya tequila.
Roberto Sanchez del Toro, importer of Rancho La Joya tequila.

A rabid lifelong San Antonio Spurs fan, it was during a hard fought pick up basketball game that Roberto took a knee to the groin.  A subsequent doctor’s exam revealed the shocking news that he was suffering from advanced testicular cancer followed by surgery and three months of chemotherapy while simultaneously reviving his failed tequila business.

All of this before the age of 24!

In this clip, Sanchez del Toro, following in his parents’ entrepreneurial footsteps, learns the pitfalls of the tequila business firsthand…

 

Here, Roberto recalls the start of 2013…

 

 

A shrewd businessman even in college, Sanchez del Toro, now with a degree in International Business, kept the lines of communication open with the García family, third generation Highlands agave producers of Rancho La Joya tequila.

Roberto takes us through the tequila’s process…

 

 

Even though the distillery has a large output capacity to meet demand, Roberto discusses what the ramifications of the current agave shortage could mean to the producers of tequila Rancho La Joya.

 

 

[To learn more about Rancho La Joya’s production techniques, click here.]

 

The new look of Rancho La Joya tequila.
The new look of Rancho La Joya tequila.

 

Along with partner, Mike Garcia, a successful San Antonio technology marketing executive (no relation to the agave producing and distilling family), and a team of consultants as guides, Roberto Sanchez del Toro, now 25, has a clean bill of health and is ready for the long haul with his newly revamped Rancho La Joya tequila, as well as having taken over the reigns of the family enterprise.

With a redesigned bottle that more accurately represents the juice inside, and the promise of statewide distribution from Glazer’s, Roberto is anxious to turn his initial sales call rejections into inspired action within the state of Texas, the second largest consumer of tequila, and beyond.

Why Tequila?

Of all the start up businesses Roberto could have chosen, he explains in the following segment why he selected tequila.

The Five Year Plan

Roberto describes where he sees Rancho La Joya Tequila in five years.

 

Rancho La Joya is available in blanco and reposado expressions.  Plans are in the works for a 36 month aged añejo to be called Diamante that will be marketed with branded stemmed glassware.

Roberto Sanchez del Toro cheers on his beloved Spurs.
Roberto Sanchez del Toro cheers on his beloved Spurs.

At this time, only the following local restaurants and bars carry Rancho La Joya…

La Fogata, Mi Tierra Café & Bakery, SoLuna, Rio Rio Cantina, Stetson Bar, Ice Lounge.

Like the San Antonio Spurs, who are currently battling in the 2014 NBA Playoffs, Roberto Sanchez del Toro has proven that bringing your “A” Game and passion into everything you do invariably results in a winning record.

***

Follow Rancho La Joya on Facebook

Or, on their website
[vasaioqrcode]

Never miss an article or review again – Subscribe now!

* indicates required

Email Format

View previous newsletters.



Learn all about tequila from field to glass and then get paid to share your love of agave spirits with others! Buy Them Both Now!

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.

 

 

Never miss and article or review again – Subscribe now!

* indicates required

Email Format

View previous newsletters.



Learn all about tequila from field to glass and then get paid to share your love of agave spirits with others! Buy Them Both Now!

How to Get Paid to Drink Tequila:

How you can turn your passion into profits and get paid to drink tequila as a blogger, vlogger, podcaster or author

 

Salud!!