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Mexican fiesta: distilled spirits products from Mexico are enjoying increasing popularity, and it looks like sales are going to keep rising for some time.

Article Excerpt
With the growth and acceptance of Mexican restaurants in the U.S. continuing to rise, and with the Mexican population exploding throughout the nation, it's no surprise that beverages from south of the border are seeing heady days. Tequila sales gained a hefty 8.6% in 2004 in the U.S., according to the 2005 Adams Handbook Advance. In the control states, tequila gained an equally healthy 8.4%. Mexican liqueurs, led by Kahlua, are still popular choices, and Mexican brandies continue to carve out a niche.

Among tequilas, Jose Cuervo still dominates the market, with more than a 40% share of total category sales. The brand reached sales of 1.4 million 9-liter cases nationally in 2004, a 5% increase (up 6.9% in the control states).

"Given that tequila only comprises 5% of the American distilled spirits market, there is tremendous opportunity for growth. The category is expected to grow faster than any other spirit category, in the U.S., particularly within the super- and ultra-premium segments, both of which are anticipated to grow at double-digit rates," noted Bevin Gove, marketing director for Jose Cuervo.

"There is a mystique and romance surrounding Mexican spirits that few other products enjoy," said Larry Kass of Heaven Hill Distilleries, importer of El Conquistador and Two Fingers Tequilas. "Whether you're talking about tequila, mezcal or Mexican beers, they've all seemingly captivated the American drinking public."

Back On Track

One thing for certain, good times have once again returned for the tequila industry. The agave crops have fully recovered from the devastating blight of several years ago.

"A lack of agave is no longer an issue," stated Andrew Floor, Sauza global brand director. "The soaring prices experienced through the crisis proved sufficient motivation for both established tequila houses and agave growers to increase the size of their plantations. The major tequila houses responded to the agave crisis by increasing controls over their estate plantation. Demand for open market agave has fallen significantly and kept costs low."

The prolonged shortage of mature agaves ultimately caused retail prices of high-end tequilas skyward. With the supply of agave once again sufficient to meet demand, what can retailers expect to happen to tequila prices?

Master distiller Felipe Soto Mares of El Duende thinks relief for consumers is around the corner. "I believe we will see the current rate of retail price increases level off soon. We in the tequila industry are well aware that our products need to be priced competitively with vodka. We are also looking at the ever-growing rum market. Pricing issues are an ongoing concern and something that we are always reviewing."

Tequilas in the Lime Light

Any discussion of the current status of tequila must begin with Jose Cuervo, the largest producer of tequila and the...