By Nicole Di Tomasso
Crafted from the blue agave plant, tequila remains a party favourite for a round of shots mixed with a lick of salt and a suck of lime, but it has also transformed into a sophisticated spirit for sipping over ice or mixing in cocktails.
Tequila represents one of the fastest-growing spirit categories. The worldwide market size was valued from USD$10.43 billion in 2022 to USD$15.57 billion by 2029, revealing a Compound Average Growth Rate (CAGR) of 5.89 per cent during the forecast period, reports Fortune Business Insights. In Canada, the market is expected to grow above a CAGR of 6.68 per cent from 2023 to 2028, according to Actual Market Research’s Canada Tequila Market Research Report, 2028.
In terms of brands, 1800 and Casamigos earned top spots on Brand Finance’s Fastest-Growing Spirits for 2023 list, both doubling their brand value since last year (up 111.5 per cent to USD$424 million and up 108.5 per cent to USD$934 million respectively).
“The tequila sector has grown in recent years,” says Henry Farr, associate director at Brand Finance in a release. “It’s outpacing other spirits, leaving tequila brands well-positioned to capture evolving preferences of consumers, where many are opting for higher quality, premium-branded product.”
Premiumization is a primary driver of the category’s growth as spendy consumers seek out quality over quantity. Premium tequilas, such as Patron, Don Julio, Clase Azul and Casamigos, are typically made from higher quality agave and undergo refined production processes to offer more sophisticated flavours, smoothness and complexity.
“Premium and luxury tequila brands are growing in popularity relative to the overall market,” says Ara Kharazian, Research & Data lead at San-Francisco-based technology company Square. “We’re seeing sales for premium and luxury brands growing two-and-a-half times faster versus overall tequila consumption, but they still account for a relatively small portion of sales (between five and 15 per cent),” adding if the trend holds, the number would likely climb over the next couple of years.
Further, Kharazian says a flood of celebrity endorsements, such as George Clooney, Kendall Jenner, Dwayne “The Rock” Johnson and LeBron James, have helped fuel sales growth in the premium-and-luxury segment.
In terms of on-premise performance, tequila has been steadily carving out a larger space for itself. In fact, Square compiled data from thousands of bars and restaurants across Canada and revealed the margarita as the drink of the summer, reporting demand for the cocktail was up 57 per cent between June 1 and July 9 compared to the same period last year.
“The margarita is certainly a seasonal cocktail, but we’ve also observed stable demand for it throughout the year,” says Kharazian. “It appeals to a lot of different flavour profiles and consumer preferences, and it might be associated as being a summer drink, but not in the way that an Aperol Spritz is, for example. If I opened a bar/restaurant, I’d make sure to have a healthy inventory of tequila all year round.”
On-premise performance will continue to be experience led as consumers are becoming more knowledgeable about the spirit and are willing to spend more to explore new varieties.
While the on premise is anticipated to dominate the market share, the off-premise channel is also witnessing strong growth as purchasing alcohol from grocery stores and liquor stores is more economical, as well as the availability and convenience of at-home delivery. The LCBO reported tequila sales were up 28 per cent in 2022 compared to 2021. Innovations, such as tequila-based RTDs, will continue to help the category gain new fans with more robust and distinct flavours.
“At Langdon Hall, the request for higher-quality tequila has grown exponentially from guests and clients alike, such as Don Julio and Clase Azul, as well as more niche products like Mezcal,” says Jeremiah Tomas, food-and-beverage manager at Langdon Hall Country House Hotel & Spa and KML Top-30-Under-30 winner for 2023. “We love to play around with the flexibility of tequila and think creatively about its flavours to expand our cocktail menu beyond the traditional margarita and Paloma. We try our best to stay true to the product itself without tampering it too much.”
