Beer, Wine & Spirits

No lost shakers of salt: Tequila looks to be premium liquor

Source: Herradura Tequila

Tequila usually brings up connotations of hard partying, shots and regrettable mornings after. Several upscale brands, however, are trying to change public perception and bring about a new tequila renaissance, this time with millennials.

"More and more consumers are interested in learning about tequila over the last five to 10 years in the same way that you think about a wine, a scotch or a bourbon," said Tequila Herradura senior brand manager Liz Edwards. "Consumers are looking to learn more about the history of that tequila brand and what makes it special, and that's an area we play really strongly in." That's in sharp contrast to seeing tequila as the booze that mixes into a margarita, or the shot that goes with lime and salt.

The Brown-Forman premium liquor brand has been introducing its product to the U.S. market using the tagline "the last true tequila-producing hacienda on the planet." Focusing on millennials, it's been investing heavily in Facebook and Twitter to engage consumers in online conversations, and partnering with digital publications like Thrillist to get the word out.

In early 2016, it will launch a series of experiential events where consumers can engage with the brand and understand its story, without having to travel down to the Casa Herradura distillery.

There's a reason why Herradura and other brands are focusing on millennials, said Devaraj Southworth, founder and CEO of on-demand liquor delivery service Thirstie. He believes millennials are starting to earn money, and want to get the best for their hard-earned dollars.

Southworth, who used to be the vice president of mobile at American Express and an executive at Accenture and Deloitte Consulting, said the age group values quality and craftsmanship more than other generations because it took them so long to reach their earning potential. When brands have a story to tell it resonates with them. With tequila only being manufactured in Mexico, the spirit has plenty of mystique and history to rely on.

"Millennials have an interest in these items that were homegrown, made with a lot of talented brewers and what have you that built these great companies," he said. "That was really the way (the whiskey and bourbon craze) got started."

Spirits expert and author of "Whiskey Distilled: A Populist Guide to the Water of Life" Heather Greene said that millennials in particular are spending a lot of their disposable income on premium alcohol. The group is seeing food and beverage as a way to express themselves through authentically sourced products, which is why the farm-to-table movement is gaining momentum.

"More consumers are asking how companies treat their employees and how they are are monetizing," she said. "They are asking how should we be drinking this for the better good, and the liquor industry is learning they have to speak to these new consumers."

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For Casamigos, co-founder Rande Gerber said he and fellow founder George Clooney created the liquor after searching for a tequila they could drink "neat or on the rocks and not be hungover the next morning."

"Casamigos is a small batch tequila and we only use the best 100 percent blue weber agaves," Gerber said via email. "Because we made it just for us to drink, we took our time and had the patience and money to make it just right. We didn't settle for anything less than perfect. Two years and 700 bottles of samples later, we finally got it perfect and it was well worth the wait."

Casamigos eschews major marketing companies for introducing its wares, according to Gerber. It's "House of Friends" campaign invites consumers to submit pictures of themselves enjoying its liquor with the brand and other connoisseurs.

What's also helping the brand is that Clooney comes with his own celebrity clout. However, Gerber insists that Clooney's involvement is more passion project that marketing plot.

"Great brands reflect the people who create them. We created Casamigos along with our friend Mike Meldman," he said. "We invested our money in it, we own it, we drink it and are involved in every aspect of Casamigos. From the tequila, to the name and bottle design, to marketing and distribution, for us it's our lifestyle. Consumers are very smart, they want the best and the reason Casamigos is the fastest-growing tequila in the country is because it is the best."

Efforts from brands like Herradura and Casamigos seem to be working. From 2002 to 2014, the Distilled Spirits Council of the United States said tequila imports grew 92 percent, with the high-end premium and super premium categories increasing 187 percent and 568 percent, respectively.

These brands want tequila's profile to rise because it means they can charge more. Going hand in hand with the import requests, U.S. tequila supplier revenues increased 203 percent for the high-end premium distributors and 513 percent for the superpremium distributers between 2003 and 2014.

At Thirstie, tequila sales are growing at a pace of about 5 to 6 percent a year, with brands like 1800 Silver and Patron Silver leading the way. Premium tequila brands like Patron, Avion, Herradura and Don Julio are seeing large increases, with the latter brand growing 25 percent in the last year.

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But, tequila still has a long way to go. The spirit only makes up 4 to 5 percent of all of Thirstie's sales. For comparison, whiskey makes up a tenth of the company's business.

It's still seen as a party drink, spirits expert Greene said. While tequila is becoming more common in upscale establishments in Los Angeles and in Texas, it still has to penetrate other markets, she said.

"Outside urbran areas, tequila it still has a huge image problem," Greene said.

Herradura says it's up for the challenge.

"We've only scratched the surface for what we've done so far. ... In the U.S., we're still working on building our awareness. There's so much more of an opportunity out there once we get people to try our product. Once you taste Herradura you will be a brand ambassador," Herradura's Edwards said.