EconomyFinancialFive Star Tequila: How the Premium Segment Helps Producers...

Five Star Tequila: How the Premium Segment Helps Producers Beat Inflation

Premium tequilas are the alternative to be able to keep profits safe from the inflationary phenomenon, which has increased the operating costs of manufacturers. From the large producers to the newest and smallest brands, practically all of them have turned to this beverage segment, which is gaining weight within their product portfolio.

By having a high price compared to the rest of the category, premium products can resist the ravages of inflation and give companies a greater margin to absorb the impact of price increases , without affecting their consumption.

“Premium products quickly absorb the increases in these international situations, such as inflation and the rise in hydrocarbons. Consumers of a premium product do not stop buying it because its price increases , and that is why they help protect companies’ margins,” explains Julián Fernández, head of analysis at Bursamérica.

The global tequila market reached a value of 13,000 million dollars in 2021 and will reach 27,700 million by 2027, with a compound annual growth rate of 12.9% between 2022 and 2027, Research and Markets forecasts.

The strategies of the brands to premiumize the drink are diverse, and range from associating them with celebrities to the development of new packaging and experiences that involve the purchase of the product.

Mexico Blue Class and Michael Jordan’s halo

The Clase Azul México tequila managed to stand out in the market after basketball star Michael Jordan was seen in 2021, during a vacation in Croatia, with some of these bottles, whose price is around 40,000 pesos , according to the websites of specialized chains.

Clase Azul México was founded in 1997 in Guadalajara, Jalisco. The company has found an opportunity to position itself by conceptualizing its drink as a craft , from the differentiated production of the tequilas in its portfolio to the design of a handmade decanter. Its products are now sold in more than 50 countries , including the United States, Canada, the United Kingdom, Spain, France, Greece, South Korea, and Australia.

“We focus more on giving a voice and a platform to Mexican folk art , which puts artisans in the place they deserve. It is part of the identity of our country and together we seek to provide you with the most sophisticated products, experiences and art-objects from the heart of the legends and myths of Mexico”, says Miguel Cuauhtémoc Hernández Ramírez, creative director of the tequila house.

The Clase Azul México tequilas have an artisanal conception. They have in common that they are 100% agave, that is to say, that all the sugars obtained during the fermentation process come from the plant, but the great differentiator is the decanters .

These containers are made by artisans and, through them, the company recounts part of Mexican culture such as stories and legends, and also highlights the materials with which they are made, in this case ceramics . These are manufactured in its plant located in Tepatitlán de Morelos, Jalisco.

For the manager, one of the big bets with liquor stores is that they generate conversation regarding their conception, which creates new moments of consumption that are not only related to the quality of the distillate it contains, which is also a relevant indicator for the purchase .

“We are focused on becoming the first luxury house in Mexico, and I would think of the word luxury as another concept of abundance. The universal laws that govern the concepts of abundance is to give and receive, and this is to have a positive impact with the resources we receive from the sale of products”, declares Hernández Ramírez.

The added value and cleaner processes are characteristics to differentiate the products that are generating these market trends, which were added to the search for greater sophistication in tequila, according to Ángel Méndez Mercado, an academic at the Escuela Bancaria Comercial (EBC) and La Salle University.

Part of this is the idea of benefiting producers and creating more education around the types of agave and the areas where they are found. “This has managed to position the brand and give it that premium category that allows them to reach another type of sector, such as collectors ,” he says.

Tequila Clase Azul México has managed to capitalize on the project and its strategy, which has led to double-digit sales growth in the last eight years.

Don Julio rises in category

Don Julio, Diageo’s tequila, has already joined this trend. Mariano Perrotti, general director of the company in Mexico, considers that an opportunity for this market came with the pandemic , which led buyers to spend more on beverages to consume inside their homes .

Another factor that contributed to the detonation of the market was the greater interest of consumers in knowing the production processes of the food and beverages they purchase , which led Diageo to raise the level of products with denomination of origin, such as tequila, before the eyes of buyers.

“The concept of the agave is everything. What it has to do with the plantation, the production process and the taste”, says the general director of Diageo. “There is an appreciation of the product, of the quality and the taste of tequila”.

With exclusivity as part of the strategy, Diageo has the Don Julio 1942 presentation on the market, which is produced in small batches and by hand. The decanter is more stylized and there are special editions, such as the one designed with Wixárika art , which was launched in November.

Tequila represents 8% of the British company’s global sales and grew 79% during fiscal year 2021.

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