New data from IWSR shows that agave-based spirits including tequila are surpassing both the rum and bourbon category by volume in 2020 in the US.
Agave-based spirits grew close to +20% in 2020 and are now the third largest spirits category in the US, behind vodka and whiskey.
According to IWSR “headline-grabbing celebrity launches” by stars including The Rock and Kendall Jenner have only served to boost awareness of tequila and mezcal”, while products from RTDs and flavoured tequilas to high-end cristalino and single barrel bottlings meeting a wide range of consumer needs and occasions.
Tequila’s ultra-premium segment has the highest rates of forecast growth, with the IWSR predicting a 2019-24 CAGR of more than 14% in both volume and value.
“Multiple factors are driving growth for agave spirits, but the main trends impacting the category include increasing household penetration through celebrities, extending consumption occasions through ready-to-drink (RTD) products, as well as new and exciting flavoured products entering the market,” said IWSR research director Adam Rogers.
“Celebrity-owned and endorsed tequila brands have benefited the category by simply making it more familiar to consumers. Their vast social media networks allow them to be real-time influencers for the brand, while allowing them to interact with their consumers and followers.”
Innovations driving growth
Established core tequila expressions including blanco, reposado, añejo and extra-añejo have been joined by everything from entry-level RTDs to luxury single barrel bottlings and innovative cask finishes.
“Cristalino Tequilas – aged products made clear by filtration – provide an additional point of interest at the luxury end of the market and are growing fast from a small base,” IWSR said.
Meanwhile, flavoured tequilas have become increasingly varied as producers move beyond the established influences of coconut and cinnamon into cocktail-enhancing flavours such as pineapple, lime, chilli pepper and mango.
“Flavours in general is a trending topic among all beverage alcohol, and it is especially apparent in the tequila category,” Rogers said.
Among those driving premium flavoured tequila growth are Cazcabel, which officially launched in Australia this month.
“Flavours have always played a role in offering a variation of an old classic or a new flavour profile, so while flavoured spirits aren’t ‘trending’, premiumisation is,” General Manager of Proof Drinks, Cazcabel’s Australian distributor, Luke Frost said. “Consumers are looking for those innovative and premium products that allow them to experiment in making quality drinks. The Cazcabel flavour range is perfectly positioned to capitialise on this current trend offering a quality and versatile liquid at an affordable price. One of the key benefits of the flavour range is that is allows consumers to make cocktails very easily at home, without the need to buy a whole shopping list of ingredients – particularly helpful during lockdown!
The rise of ranch water
Tequila-based RTDs – which the IWSR predicts will grow at a volume CAGR of over +30% in the US between 2019 and 2024 – have expanded to include newer combinations such as the Paloma and Ranch Water, alongside the ever popular Margarita.
Ranch Water is the tequila version of a highball. It’s traditionally made by mixing a bottle of Topo Chico sparkling mineral water with a splash of tequila and a squeeze of lime.
Rogers noted: “As the demand for these cocktails has persisted, consumption of the spirit neat and/or on the rocks has increased significantly, creating an additional consumption occasion for the category.”
IWSR says flavoured and RTD products – like flavoured Bourbons in the early years of the American whiskey revival – are powerful recruitment tools to draw consumers into the tequila and mezcal categories.
The broad demographics of agave spirits consumers are another strength – there’s an almost equal split between men and women, and with a balanced age range: 46% of agave spirits consumers are aged 25-44, and 34% are aged 45-64.
“The consumer appeal of agave spirits is also partly based on the fact that they are overtly plant-based, and are seen as being a “clean” and “light” spirit, creating a “better for me” perception among consumers,” IWSR said.
“These days, consumers and bartenders in the US genuinely understand and appreciate tequila, especially 100% agave tequilas,” says Chris Moran, founder and CEO of Ghost Tequila, a fast-growing spicy tequila.
“Now that people increasingly recognise and enjoy the different nuances of this spirit, that has opened the door to interest in craft tequila – just like we’re seeing with craft gin, craft vodka and craft whiskey.”