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Cuervo, Sierra and Aztec dominate the off-trade tequila market, says Tom Bruce- Gardyne, where ready-made Margarita mixes are softening the macho image

Diageo’s brand manager for José Cuervo, Kirianne Green, has seen the UK tequila market bounce back in the last two years. Before this the category was in double-digit decline following the withdrawal of the market leader Cuervo Blanco. That decision was taken because of the shortage of agave, the cactus-like plant used for making tequila, and the need to safeguard supplies for Cuervo Gold which accounts for 90% of Cuervo’s global sales.

Compared to the well-developed and much larger US market, tequila sales in the UK are relatively modest at around 120,000 cases a year. Of this, Cuervo has the lion’s share of 44%, followed by Sierra tequila with 24%. Sierra, distinguished by its red plastic sombrero stopper has been suffering at the hands of Aztec tequila, a new price-fighting brand with a £9.99 shelf price and a green cactus for a cap. Together these three brands dominate the UK off-trade which accounts for around 40% of total tequila sales. In the on-trade the leading brands include Sauza and Pernod Ricard’s Olmeca.

While Cuervo Gold is the UK’s top-selling brand, its stable-mate, Cuervo Classico, has been driving recent growth in the category, says Green. Launched in December 2003, this white tequila, now accounts for a fifth of Cuervo’s UK sales. The good news is that it has not grown at the expense of Cuervo Gold and, like other white or silver tequilas, has carved a separate market for itself.

Supermarket sales data suggests that consumers tend to stick with one style. Gold is usually favoured for making Magaritas, as can be seen by the number of people who include limes and Cointreau in their shopping trolleys whenever they buy a bottle. Alternatively, consumers can buy the brand’s Margarita Mix to save the hassle of squeezing limes and buying the other ingredients. Where Margarita Mix has been listed in supermarkets like Waitrose it can apparently really boost tequila sales. Meanwhile, white tequilas are increasingly being mixed with fruit juice, ginger ale and Coke as in the States.

This is the model the big brand owners wish to follow as tequila grows up and moves on from its macho slightly tacky, slammer-based image. Two years ago it was estimated that 90% of tequila was drunk as a shot, followed by a pinch of salt and a suck on a lime. Today, that figure is nearer 60% as people learn new ways to drink the spirit.

Last year Diageo ran a campaign to promote its brand with Coke. In America a fifth of tequila is drunk “mixed – in other ways”, with the remainder split equally between shots and Margaritas. Adopting such a pattern would certainly broaden the spirit’s appeal in the UK.

Back in Mexico, the shortage of agave plants, which need up to eight years to reach maturity, has turned into a huge surplus. Next year’s harvest is likely to be double that of 2000. So far, this has not had any great impact in the UK among the main brands. Cuervo has maintained its price and is showing annual growth of 9%. However, the overall category, where MAT sales were growing until six months ago, has now stalled, according to Nielsen. Some blame cheap, low-quality tequila and its spiritual cousin, Mescal. If new recruits have an unpleasant experience it may be their first and last taste of tequila.

Top-end tequila on fire

With the majority of sales in bars and pubs, tracking tequila’s progress in the UK is not easy. Kirianne Green reckons Nielsen picks up only 40% of her brand’s sales in the ontrade. Anecdotal evidence suggests this market is actually quite buoyant with renewed interest in classic cocktails like the Margarita, and in super-premium aged tequilas made from 100% agave like Cuervo Tradicional. “The premium-end of the market is on fire,” says Green. “Some of our key accounts in London are telling us they’re selling more Tradicional than they are vodka.” This summer Diageo launched Don Julio as one of its “Reserve Brands” in the UK as a premium tequila now listed in highend bars and shops like Harvey Nichols.

This year’s Christmas campaign for José Cuervo will focus on Margaritas and the new Cuervo Sweet Shot in which an orange dusted with cinnamon replaces the lime and salt. The brand has continued its sponsorship of events like this summer’s Wireless Festival in Hyde Park where concert-goers were treated to frozen Margaritas, though the sponsorship of Xfm Radio has been dropped to focus on the trade. But for Diageo’s Green nothing compares to installing a Margarita machine in a bar which can boost sales from half a bottle to four or five cases a week.

UK tequila volume share 2005 (% MAT volume change)
Jose Cuervo Especial Gold: 38%
Sierra: 24% (-3%)
Sauza: 11% (-23%)
Aztec: 8% (+10%) J
ose Cuervo Clasico: 6% (+1217%)
Maverick: 4% (+5%)
Others: 9% (-15%)
Source: ACNielsen©

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