Tequila Rack Blog

I just got off the phone with an old industry Pal and we were talking back and forth about Tequila pricing. Not just any pricing, but the pricing at the low end of 100% Agave Tequila in the state of California. I had just gotten back from a trip to Jons Market (http://jonsmarketplace.com/) and had seen Morales 100% Agave Blanco and Reposado on display for $7.99 a liter. You can see a picture of it I took with my phone here: http://twitpic.com/6ie5fi

For those interested, below is what the corrected math looks like on importing the cheapest case of six 1Liter bottles of Tequila 100% Agave into Southern California with every tier (Distillery, Importer, Distributor & Retailer) making their full 30% gross margin, which is what is typical for an unknown brand:

If you understand the numbers above, then you can plainly see that it is impossible for a bottle of Tequila to be on the shelf for sale in California for under $17.25 per liter. So how do they do it? How is it that we can find so many bottles below this $17.25 threshold price? Well, it first starts with a reduction in margin at every tier in the equation. This is only possible for a known, volume brand of at least a container per month in US volume. For high volume brands, the equation should look similar to this:

So, with a volume brand, all tiers, producer, importer, distributor and retailer reducing their margin to 22% each, the best price on the shelf is $11.22/Liter.

So how is it that we have $7.99/liter pricing on the shelf at retail in Southern California? How can they possibly do it? Your comments below are much appreciated before I do the reveal. What I will also show is the new range (new age?) of Tequila pricing that, if you spot it on the shelf, you will know that the brand is either being liquidated (or if back by a larger company is being introduced). In almost every scenario, with the exception of a new brand launch, the importer or distributor is supporting this loss was left holding the bag (inventory) and has lost all of their investment in the inventory.

If you are a small US importer or importing distributor of Tequila, pricing such as this can be very disturbing and are confirmation of my previous predictions found in this blog. It’s time to seek shelter and/or strap yourself firmly to the yardarms and cut all costs. Hang on for the ride of your (and your brand’s) life. Good Tequila will be available for below actual cost of production/tax/shipping for at least two more years, maybe more.

You as a brand owner have to be very attentive to your price and pricing models, but more importantly your actual profit. You have to have a line item for free samples, events, competitions and other marketing costs which are not even captured here in this exercise as we are assuming lowest cost pricing models. If you are a brand owner and have a business plan that states that your brand will sell 10,000 ce’s in its first year and will be profitable in anything less than 20 years from inception, you have already bought a losing lottery ticket.

If any of the above rings true for your brand, please contact me, I may be able to assist.

A special thanks to the late Brad Hoover who assisted in the development of this latest interpretation of TequilaRack™.

It was Brad’s sound advice and continued encouragement that has kept us going through these very tough times.

TequilaRack™ Micro Tequila Tasting Kit gift pack – Is comprised of three distinctly different 100% Agave Craft Reposado Tequila brands from diverse distilleries, aged in diverse barrels along with a proper tasting jigger, spirit-specific tasting information and food pairing via www.TequilaRack.com – all of the items needed to perform an “At Home” Tasting Party of these rare, aged, sipping Tequilas.

Very limited and numbered quantities available at your finer Liquor Stores & On-line.

Each Tasting kit contains:

- From the Highlands: Don CelsO 100% Agave Reposado Tequila 375ml aged in New TN Oak Barrels

- From the Lowlands: Arette Unique 100% Agave Reposado Tequila 375ml aged in Used Jack Daniels Barrels.

- From Sayula in the South: Penacho Azteca: 100% Agave Reposado Tequila 375ml aged in Used Cognac Barrels

- 1/4 & 1/2oz Stainless Steel Tasting Jigger to measure out your correct tasting pours

- Tequila education and Tequila tasting information via http://www.TequilaRack.com/

You can read more about International Tasting Group | TequilaRack products and services here:

http://www.TequilaRack.com/

http://www.tequilarack.com/blog/

http://twitter.com/TequilaRack

http://www.DiscoverTequila.com/

http://www.DiscoverMezcal.com/

New TequilaRack™ Tasting kit 2010 available now

TequilaRack™ Logo Blue

Our First Family of 6 Micro Tequila Brands

Ultimate Tequila Tasting Kit#1 of 75″de Lujo”

TequilaRack™ TastingRack™ for on-premise Table Tastings

INTERNATIONAL TASTING GROUP CONFIDENTIAL AND PROPRIETARY INFORMATION: This communication contains information from International Tasting Group, L.L.C. that may be confidential. Except for personal use by the intended recipient, or as expressly authorized by the sender, any person who receives this information is prohibited from disclosing, copying, distributing, and/or using it. Nothing in this communication is intended to operate as an electronic signature under applicable law.  Copyright 2010 International Tasting Group

Tequila Brands and Producers Have Already Sailed Into the Sucker Hole

For those new to the expression, a “sucker hole” is a colloquial term referring to a spate of good weather that “suckers” sailors into leaving port just in time for a storm to resume at full force and wreak havoc on the ship and crew.

For both Tequila Brand Owners and producers of a certain size, their ship has already sailed, and the storm is now closing in on them. Some in denial, others looking through rose-colored margarita glasses, still believe they can navigate through to that glimmer of light on the horizon. However, the perfect storm of doom looms just past the horizon of hope, and will soon envelope and destroy most, if not all, in its wake.

Oh, and that’s the good news. The bad news is that only a few of the big and the very nimble will survive.

This is because of a number of factors, primarily that too many of us bought in to the Yankelovich and similar studies that declared premium and above 100% Agave Tequila brands as the next big thing.

While the premises of these market premonitions were undoubtedly true, too many of us jumped headfirst into the juice just before the world economic decline. Six hundred brands have turned into 1200 brands in less than five years. The growth of the market has been dramatic compared with other distilled spirits, yet, it’s still relatively small, ranked only 4th in US volume. It has not grown fast enough to accommodate all of the entries into the field.

Resistance is Futile – Change is at Hand for the Tequila Market

The Gravy Train Wreck Ahead

I’m sure that for many of you, in just reading the title of this article, your blood pressure has escalated, and you may already be misdirecting your anger at the author.

For others who have experienced the many similar economic paths to consolidation in the global beverage industry, you have already accepted that change has to occur, and you will soon better understand and appreciate the math behind what I am about to lay out, and why everything I’m about to outline here will happen in due course.

For those of you who have your personal fortunes riding on the Tequila Train, both prominence and profit may still seem to be so close that you think you can see the light at the end of the tunnel, or beyond the next bend. But, I’m sorry to say that for most of us in the biz, the light at the end of the tunnel is that of an oncoming locomotive. This will be a catastrophic collision, albeit in slow motion, that will drain your resources and your resolve.

What can be learned from the Russians? (Excerpted from JustDrinks.com)

The global economic crisis has had a significant impact on the Russian spirits market, changing market dynamics and briefly halting the much-lauded premiumisation trend, according to current research.

A recently released report from the International Wine and Spirit Research (IWSR) on Russia’s spirits market claims that the downturn has also led to “…disruptions across the supply chain, with many suppliers and distributors going bankrupt or halting production. For healthier companies, however, it has presented an opening to establish their brands and take market share…”

The Silver Tequila Clouds have a very Dark Lining (Excerpted from Global market review of Tequila – forecasts to 2013 www.researchandmarkets.com )

The history of the Tequila industry has been one of boom and bust. Sales rose during the 1940’s only to collapse again in the mid-50’s. Export sales rose steadily from the 1960’s onward, although domestic sales fell sharply in the 1980’s due again to an economic slump, and the severe Mexican economic crisis of the early 1980’s resulted in plummeting sales.

The market was again disrupted by a critical shortage of Agave beginning in the late ’90’s, which served to hold back the category’s international development as brand owners were forced to divert limited supplies to the core US market, and quality perceptions were damaged as some manufacturers moved from 100% to 51% (Mixto) Agave products.

Today, that dynamic is in reverse, and the market is in oversupply. More and more 100% Agave products are coming into the market. This is helping to raise quality perceptions, and in turn, demand is surging not only in core Mexican and US markets but across a number of other countries.

The outlook for the category has rarely been better, and Casa Noble Tequila president and COO David Ravandi commented, “Tequila is entering a stage of consolidation in the world markets. It is no longer a fad. The fact that 100% Agave Tequila exports have increased tremendously over the last two years is extremely positive for the product’s outlook in the years to come.”

US Tequila Importation is a Sucker Bet

“My cousin will make the best Tequila for you Mr. Gringo”

“So, my friend, you want a great Tequila brand? We will make it for you. Just fifty percent cash up front to start the process.”

Unfortunately, far too many have fallen for this old gag. Relying heavily on the forecasting reports of the early 2000’s that suggested that luxury Tequila would be the next big spirits category after vodka.

With dollar signs in their eyes, the believers drank the Tequila Kool-Aid, most of them spending way too much to buy a brand, custom molded bottles, etc. But the worst part was that this left little if any money for marketing. Many did not even understand brand marketing inflation was happening right under their noses.

It had started soon after Patron hit 100,000 cases in volume in 2001, and the cost to market a Tequila brand in the US went from $1 to $10M per year. Today it takes at least $20M per year just to play in the same ballpark as Patron’s $50M plus, Sauza’s $35M plus, and Cuervo’s $30M plus marketing budgets.

Who could have predicted that a “realistic” business plan for the next successful ultra-premium Tequila brand calling for only 10,000 cases in the first year would end in it’s investors taking a bath?

The problem with this equation is three-fold:

1) Pricing: Unlike vodka and white rum, 100% Agave Tequila is just too expensive to produce and bottle in Mexico. Unless, like rum, vodka and mixto Tequila, it is able to be shipped in bulk and bottled near the final consumer, the cost involved with 100% Agave Tequila is always going to be too high to attain critical volume and profit levels.

2) Volume: US mass volumes are best when a spirits category is between $9.99-29.99/750ml. One hundred percent Agave Tequila is currently profitable only at the upper ranges when higher volumes are attained.

3) Distribution: The US “3-Tier” Distribution System is at best an oligopoly, and 19 states run a monopoly. Of the 1200 plus Tequila brands, want to guess how many they want to carry? Well, after the top 20, you are very lucky to be “special order only”. If you are fortunate enough to live in the states of California or Arizona, where one can be both the importer and distributor, you will find yourself driving your precious Tequila brand around to each account in your car.

Without product volumes or market clout, you will be hard pressed to get even an appointment, let alone a vender number with the chain restaurants and grocery stores. These major chain stores like Chili’s, Chevy’s, Costco, Kroger, etc., drive at least 85% of the combined volume in all but the control states. Without access to the chains, your market becomes the handful of privately owned, “Mom & Pop” accounts that usually know that small independent distributors are easy prey for bending the law on consignment, stringing out payments, or not paying at all.

While driving your own brand around certainly makes time for the personal touch and focus, these hand-selling efforts prove to be the most inefficient ways to distribute one Tequila brand. Your glass ceiling to fame and fortune becomes that next level of chain distribution that can only be had by a state-wide delivery system of the large wholesale distributor.

With Tequila segment Pricing, Volume and Distribution all against you, one will need to have a lot more money than the brands of the past in order to simply survive in the US.

Tanks-a-lot for Nothing

Call the tank maker and raise your stocks of liquid now!

Unfortunately, most of the mid-sized Tequila distilleries have bought into the notion that Agave prices will go up in the very near future. They base this notion on the boom and bust cycle of the past, and like Lehman Brothers, believe that they have successfully timed the market.

Greedily, many producers are now mortgaged to the hilt in order to produce all the Tequila that they possibly can afford to store in stainless tanks or wooden barrels. Fear of the impending Agave price increase that has yet to happen (and may not for many, many years) has seemingly forced them all into a squirrel-like stockpiling frenzy.

Are they storing Blanco, like acorns, for the hard winter ahead? These stored nuts of liquid demise are in reality winds conspiring to produce the perfect storm for all but the most financially secure and/or nimble producers.

The Economic Fall of the Medium Sized Producer

As the dooms day clock ticks down, all but the biggest distilleries, short on cash and heavy in liquid inventory, will soon be courting anyone with a US dollar. But that market is rather small, and unless the CRT (Consejo Regulador del Tequila, Tequila’s governing body) changes the law and allows 100% Agave Tequila to be bottled outside of the appellation area, the price of a “pipe” of 100% Agave Tequila will begin to drop faster and farther than that of its half brother mixto. Too much 100% Agave Tequila chasing too few in-zone buyers and/or bottlers will cause another price collapse, except this one will be a price collapse on the finished product.

As this scenario starts to unfold, a few things will begin to happen simultaneously:

1) The largest producers (top 5) will buy out the top 20 as their values will be diminished. Larger or well-financed producers will be able to buy out their smaller rival producers with little cash and mostly their own corporate stock. These bigger players will do this not just to shut down a competitor, but to get their hands on their vast value depressed inventory of 100% Agave Tequila for their own use, and perhaps get some under marketed brands of promise as a bonus to develop or sell.

2). The next tier of 25-75 producers will die out.

3) The smaller producers, like micro-distillers, will survive by remaining small and being content just making incredible craft Tequila.

Tic Toc…

The Mayan calendar ends on Sunday, December 23, 2012.

“Both the Hopi and Mayans recognize that we are approaching the end of a World Age… In both cases, however, the Hopi and Mayan elders do not prophesize that everything will come to an end. Rather, this is a time of transition from one World Age into another. The message they give concerns our making a choice of how we enter the future ahead. Our moving through with either resistance or acceptance will determine whether the transition will happen with cataclysmic changes or gradual peace and tranquility...” — Joseph Robert Jochmans

First, let me start out by saying that I’m not the Nostradamus of Tequila, or “Z-Doctor-of-Death-&-Despair” that I was referred to as most recently.

However, as far as I’m concerned, the Mayan’s have it right regarding the current business economy of Tequila and its transition from one World Age into another. In my opinion, the Mayan’s prophesy that the end of the world is rapidly approaching for many in the Tequila system, is spot on.

2012 The Mayan Curse of the US Bonded Warehouse

Many have already made their containers of US tequila brands and now they reside in bonded warehouses across the US, mostly in the Southwestern Border States (Arizona, California, New Mexico, and Texas). Few ever thought they needed to know that the US federal spirit taxes are due either prior to withdrawal or when the clock strikes five years, then the Tequila will be considered as invulnerably abandoned and shall be transferred into General Order Warehouse for liquidation.

The fifth year for many young Tequila importers has already begun; for others, it is fast approaching. My phone has already started ringing regarding pallets of product being liquidated. Trailer loads will be next. It seems that the US economic crisis almost exactly coincided with the CRT report of over 1200 Tequila brands. This inverse relationship of too many brands chasing a down world economy will, by my calculations, put the bulk of the bonded brands ready for liquidation near the end of 2012.

While the one container per month business plan is long lost, the taxes will come due. With no money left in the coffers, products will begin to liquidate. At first, prices will be reasonable, perhaps as high as $7.00 per 750ml. But prices will rapidly erode as a still saturated Tequila market will not be able to absorb the extra inventory. Prices will continue to decline for these unknown and ill-marketed brands.

I predict that the bottom feeders with cash will be able to get 100% Agave Tequila FOB (Freight on Board) bonded warehouse for as little as $3.14/750ml. Just enough to cover the federal taxes, plus $1 for the broker and warehouse fees.

Run, Don’t Walk to the closest Exit Strategy

If any of the following describes your business, you need to be a seller or begin the shut down process:

• You do not have a business plan, or the boilerplate business plan you bought states that you will sell 10-12,000 in the first year (and you are not even close in year two).
• You are undercapitalized and do not have access to at least $1M per year for the next 10-20 years.
• Your company does not own at least a portion of the distillery that produces your product.
• You have pre-ordered and pre-paid for containers of product at a price higher than you could buy it for today (or tomorrow).

If however, any of the following describes your company, you may be a survivor:

• You’ve won PowerBall or similar lottery and have the resources to stay afloat for 8-10 more years.
• You have distribution in most of the US states and Duty Free.
• Your brand is backed by a very large multinational corporation.
• You, your distillery, and your brand have generations of lineage.

My recommendation for all those that do not have at least $10M worth of investment to weather the storm? Find the funding or get out while you still have your home and sanity. The Tequila market will remain saturated until at least 2016. Pricing will continue to drop in order for Tequila to compete with other spirits categories, primarily vodka and rum.

This is a Time of Transition from one Tequila World Age into Another

The Future Ahead

Unless some government interference changes the course of this tsunami and rescues the lot, 100% Agave Blanco Tequila pricing will fall in line with other white spirits, vodka and rum, with the bulk of the volume at $9.99 per 750ml for the low-end, and $29.99 at the Grey Goose/Belvedere high-end. Aged Tequilas will march down in lockstep to accompany their Blanco brethren at a $5-$10 spread on the shelf. Exotic Tequilas will still command higher prices, but the volume to run a business will be the same range as vodka.

How should we enter the New Age of Tequila Transition?

An updated industry survey showed that nearly 100 percent of respondents feel drinkers are now more focused on value. Only 75 percent felt similarly last year, according to the annual survey conducted by Robert Smiley, director of wine studies at University of California-Davis.

With continued education and time, Tequila will mature into its own. Maturity will cause a further divergence in pricing for Tequila. Mixto will remain the mixer of choice as prices continue to decline so that only mega producers of mass volume will be able to make any money. The money-makers in this segment will have to go to larger, more efficient containers beyond 1 and 1.75 liters. Think of large, aseptic packaging such as boxed wines and bigger. Also, kegs of mixto Tequila, like beers, in up to 50 liter sizes.

Blanco, and perhaps to some extent Reposado 100% Agave Tequila styles, will begin to follow the pricing of other mainstream spirits, vodka and rum. In this $9.99 – 29.99 price category volumes will grow. The big players are already in this segment with Patrón, Cazadores, Cuervo’s Azul and 1800, Sauza’s Hornitos, Brown-Forman’s El Jimador, and the new Gallo entry, Camarena. This category with be dominated by the big manufacturers that have the distribution muscle and can afford the promotions support of at least $10M per year.

Sure, there will be other Blanco’s in the stores, but unless they are store supported as a “house brand,” volumes will be relegated to 5-10% of the segment. Why buy a $39.00 Blanco when you can get an Añejo at the same price? Yes, some will continue to buy Patrón Blanco, but the pricing will fall to that of comparable high-end vodkas like Grey Goose and Belvedere, at least a $10 discount from today’s price, about $29.99 per 750ml in the volume liquor and chain grocery stores.

Añejo, and extra-aged products, will begin to command the ultra premium price points and above. Moreover, Añejo’s (Tequila and Mezcal) will begin to follow pricing similar to Irish and Scotch Whiskey, with its own price segmentation based on perceived quality and marketing. This will be the market of the small survivors with the ability to make consistently great, aged craft Tequila.

As the clock ticks down to the end of 2012, a new world order is approaching. It may come gradually enough for some that it is hardly noticed until it’s too late. I foresee the slow starving of all but the nimble and mighty Tequila brands, producers and farmers alike.

Some will fight this impending consolidation, I’m sure. But this change will come nonetheless, and it will be a profitable event for the few that survive their trip through the sucker hole. I myself have decided to remain nimble, strapped into my dingy, Riedel in hand, waiting out the storm.

Copyright 2010 International Tasting Group (ITG), All rights reserved. Unless otherwise noted, ITG is the legal copyright holder of the material on our blog and it may not be used, reprinted, or published without our written consent.

Links

SPIRITS TRENDS

U.S. Spirits Market 2008, Gross Revenues by Price Category

http://www.discus.org/pdf/2009IndustryBriefing.pdf (This is the most recent report by DISCUS for 2009. Tequila volume is still listed as 4^th.)

http://www.thefreelibrary.com/Spirits+fast+track+brands.-a0144204154 (shows Patrón reaching 119K cases in volume in 2001.)

http://archive.cyark.org/2012-understanding-the-maya-calendars-blog

http://www.forgottenagesresearch.com/index.htm

http://www.nostradamus.org

http://www.oceanfreightusa.com/topic_impg.php?ch=19 (Bonded warehouses.)

http://dsc.discovery.com/news/2009/02/09/tequila-agriculture.html (agave farmers)

http://www.yankelovich.com/ (state of the consumer)

Tequila tasting flights are growing in popularity in bars and restaurants across the globe. With over 1200 Tequila brands (and counting), a growing number of folks are thirsting for information and guidance on how to select “better brands” to taste and compare. Progressive restaurateurs are leveraging the popularity of Tequila Flights as a catalyst for up-selling more Tequila, appetizers and desserts, thereby growing profitable sales through both menu listings and food pairings. ITG’s TEQUILARACK™ provides you with a complete system to experience this complex and most misunderstood “Nectar of the Agave Gods” in a fun, responsible and cost-effective way.

So exactly what are Tequila tasting flights ?

Generally, tasting flights of distilled spirits are comprised of at least three 0.25-0.5 ounce servings of similar items for customers to taste and compare. The two types of Tequila tasting flights are vertical and horizontal. Vertical tasting flights are three tastes of the same brand but of different ages. For Tequila, it’s typically a Blanco, a Reposado and an Añejo. A Horizontal tasting flight consists of three different Tequila brands, all of the same aging style. It is best to use three diverse brands from different distilleries so that you are able to experience the widest variety of flavors and aromas. Since ITG’s TEQUILARACK™ Tequila brands are from different distilleries, that use agave grown in different micro climates, fermented with differing yeast strains, distilled and filtered by different equipment, using different recipes, and aged in different new and used barrels, it is easier and more interesting for one to taste them side-by-side.

How are Tequila tasting flights best served ?

Tequila tasting flights usually consist of three different ¼ – ½ ounce pours into three Tequila tasting glasses, Champagne flutes, or similar (not shot glasses). It is best to perform the pour and sit the bottle right in front of the glass in order to emphasize the extravagance of this presentation, show the bottles, and to indicate that these Tequilas are to be savored like a fine Cognac, rather than shot with salt and lime.

How are table tastings best performed ?

Tasting flights are best introduced to your party in the beginning of the meal service and suggested to go along with appetizers, a paired prefix menu, or at the end of the dining experience with the dessert course. As you know, it’s all in the presentation.

• Carry out the TEQUILARACK™ Tasting Rack to show your guests (suggestive selling)
  
• Use proper Tequila tasting glassware, or champagne flutes, not shot glasses.
  
• Pour out three separate 1/4 -1/2 oz servings using an appropriate speed pour or jigger,
  
• Provide history, production and other defining characteristics of each of the brands as you pour them
  
• Pair each brand with a course on the menu
  

Why is education the key to enjoying Tequila tasting flights?

There are many types of Tequila in the market today, but few are really known or experienced intimately. In fact, most of the Tequilas consumed are rarely tasted as they are mixed into Margaritas or downed quickly as shots. As with Micro beers, there is a whole new world of flavors to savor with TEQUILARACK™ brands.

Educating about these and other fine sipping Tequilas is the first step toward having them successfully presented as a Tequila tasting flight or food pairing to your guests. Your guests will be elated to discover and communicate the differences from other Tequilas that they have had before. Our free Tequila training is available on our website, www.TequilaRack.com .

How should Tequilas be featured for best results ?

There are many ways to harness the fun of offering tasting flights, here are a few:

• Create a dedicated Tequila Menu with detailed flavor descriptions, history, distillery and/or geography/micro climate for each brand
  
• Make sure you post your Tequila menu on your website
  
• Offer a monthly rotating special on three select brands as a tasting flight or Tequilas of the month club
  
• List Tequila and food pairing directly on your menu, table stand and/ or feature boards.
  
• Promote three ¼ oz. flights to include their favorite pick as a standard pour (pick 3 get 1 free)
  
• Phrases like, “TEQUILARACK™ 100% pure Agave sipping Tequila” or ” Micro Tequilas” or “Tasting Flights” immediately open minds to question, “What is that all about?”
  

   

Each Tequila has a story to tell and it needs to be communicated poetically in product listings, with consistent name formatting.

What are the most successful themes, events and Tequila tasting party ideas ?

A single priced Tequila tasting party or dinner is the best place to start. Some others:

• Tequila and Cigar Special
  
• All Day T & A (Tequila & Appetizers)
  
• T-N-T (Tequila & Tapas)
  
• Flights of Fancy: Tequila and Dessert Flights
  
• Tequila Tuesday
  
• Flight Nights
  

Shelf life and stability: Treat your Tequila the way you would treat any fine liquor, wine or beer (no heat, light or movement). Once opened, your Tequila will remain fresh for about a year. Because of a higher alcohol content, Tequila is a little sturdier and does not suffer from oxidation the same way that other alcoholic beverages do. Unlike beer or wine, Tequila’s flavors don’t “turn” or become acidic, oxidized or skunky. The Tequila just seems to get “smaller”–it starts to lose its aromatics/alcohol and its flavors get less defined. Tequila should retain its polished mouth-feel and clean taste for a year or more (as long as the cork does not dry out). For an open bottle of Tequila, it’s the air gap between the top of the bottle and the meniscus of the Tequila is not your friend, as this is where the aromatics and alcohol escape from solution. If you happen to have Tequila that you are not moving through fast enough, before it gets too old, drink it. You can always marinate, cook with it, or use it in a high-end cocktail as it gets past its 1yr opening anniversary. If you plan to store it, you need to do so like wine, in a cool dark place. If it has a real cork, you may want to put it on its side to prevent the cork from drying out, but you will need to keep a close eye on it as you may still experience some leakage, wicking and evaporation due to poor cork quality, fit, and the volatility of the liquid.

Are there any simple rules for finding the best sipping Tequilas?

The easy way is to look for TEQUILARACK™ brands, produced & bottled in Mexico. Other key indicators:

On the label:

• 100% Weber Blue Agave
  
• “CRT” logo on label
  
• NOM # on label
  
• 38-40% alcohol by volume (80 proof)
  
• Style should read Blanco, Reposado, Añejo or Extra Añejo (steer away from silver & gold)
  

Other indicators

• Tightly secured and sealed lid
  
• Bottle is not sitting in direct sunlight
  
• The bottle has not been sitting in an unusually hot location
  
• No Worm!
  

More information on how to identify great 100% Weber Blue Agave Micro Sipping Tequila can be found on our educational website www.TequilaRack.com

• Mothership site: http://www.TequilaRack.com
  
• Twitter: http://twitter.com/TequilaRack
  
• Facebook: http://www.facebook.com/#!/zarus?ref=profile
  
• Please try our Free CRT based Tequila Training course & tell us what you think: http://tinyurl.com/mul5cl
  

Nancy Davison’s fantastic article, The Price Of Maturity – The Current State of Tequila, continues the confirmation that the famed Vino Mezcal from the town of Tequila is starting to mature into the mainstream after 300 or so years. Like the Agave itself, maturity has come slowly to this fine spirit and we experience it today in its early adolescence, struggling to find its own identity beyond the Margarita and shots that provide us with alleged superpowers.

As we are now inundated with over 1200 new brands, styles, flavors, and of course, beautiful bottles, it is my opinion that our beloved “Nectar of the Aztec Gods” is showing signs of multiple personality disorder. Experimenting with corked bottles like Champagne, flavors like Vodka, and now pricing like Rum, Tequila is surely going through its toughest stages of puberty, trying to find its way in this world and establish its own identity. Hopefully, we will someday see our Tequila grow up, shedding its many vices, and maturing into its own reputable bipolar identity of both a fine mixing and sipping spirit.

I say that we need to be careful as all of this current clutter has the potential to hurt the spirit of Tequila, especially in terms pricing. It was not so long ago that we were able to quickly discern, just by a glance at the price, or the word GOLD on the label, the difference between a Mixto Tequila and a fine 100% Agave sipper. Today the lines are blurred. More and more I am finding many very fine 100% Agave Tequilas, with stainless tanks overflowing, chasing the phantom volume of its half brother Mixto, down into the wells of pricing. I know of many impatient brand owners holding their breath and diving deep into the value price arena in hopes of finding their erroneous business plan volume. Could this really be the cure to their bulging warehouse inventory of China made bottles, pennies on the pound agave spirit, and cash flow? Not likely. There will be little longevity for ill-marketed brands that depend solely on price.

Yes my friends, the drama for our maturing Tequila has just begun. The excitement is sure to continue with passion, at least until the next Agave shortage is realized, and the last of all the many new stainless tanks are emptied. Until that time, stock up my friends. You may never see all of these great value brands at these fantastic prices ever again.

The Price Of Maturity The Current State of Tequila (You can find the complete article here: http://tinyurl.com/y2ouk7r)
Nancy Davidson

In the December 17, 2009 issue of Drinks International online magazine, the headline reads:

WHO plans global duty free liquor ban

The story goes on to say…

“The World Health Organization (WHO) has shocked the duty-free industry by proposing a global ban on duty-free liquor sales, a business which was worth $6.3bn last year.”

The proposal to slow down alcohol consumption was actually published in December of last year, but will finally get onto the WHO’s Executive Board agenda between January 18-23, 2010. The Board is made up of health ministers from 34 leading countries, and if it approves the proposal, it will be presented to the WHO’s full annual General Assembly in May 2010.

Keith Spinks, secretary general of the European Travel Retail Council (ETRC) believes that the proposal will pass the Executive Board and into the General Assembly that is made up of 193 governments, and warns, “If this goes though, it will be a disaster for the industry.”

Should the World Health Organization ratify this proposal, there is an upside.  According to Spinks, this proposal on liquor would not be “binding.”

“It is going to be up to each member country to decide whether to implement the proposal or not.” But, he adds, “My fear is that some countries will and some won’t, leaving us in a big mess.”

In 2005, the WHO tried to ban duty-free tobacco sales through its Framework Convention on Tobacco Control (FCTC). The FCTC was ratified by 165 countries worldwide, but has yet to be implemented by any country.

A quick review of the members of the World Health Organization may give a clue as to why.

Alcohol, Tobacco, and Tourism

All countries which are Members of the United Nations may become members of World Health Organization by accepting its Constitution.  So, which countries are members?

Australia, the Bahamas, Costa Rica, Dominican Republic, Egypt, Finland, Germany, Hungary, Italy, Mexico, Switzerland, UK, and the USA, to name just a few.  Most all of these countries have one or more international airports with duty free stores selling among other things, spirits, cigars, and cigarettes.

Not only do most of these member countries tout tourism as a major industry, but many also have their signature spirits (and cigars, in some cases) that define them.  Examples are rum from Barbados, limoncello from Italy, and of course, tequila from Mexico.

Where duty free merchants pay inventory/business or other taxes, customers usually pay none.  For these countries, tourism, and the profit made at duty free shops from alcohol and tobacco sales, is directly related to each other.

How much damage could the enforcement of this proposal do?

WHO vs. Patrón

As stated above, duty-free liquor sales from last year amounted to $6.3 billion in 2008.  That accounted for 17.2% of the total global liquor business according to the Drinks International article.

In the April 2008 issue of Impact Magazine, it states that Patrón tequila was also penetrating the travel retail sector overseas, long a key channel for high-end spirits but one in which tequila was underappreciated.  Patrón was aggressively growing its brand by sampling at very visible public relations events in key cities such as London, Athens, Hong Kong, Singapore and Sydney, all whose countries are members of the World Health Organization.

The Patrón Spirits Company, producers of Patrón tequila, claim on their website to be in over 100 countries and islands worldwide.  Given that there are only 193 members of the WHO, the chances are good that Patrón is available in the duty free stores of most of these member countries.

Assuming that the same 163 countries that ratified the duty free tobacco ban in 2005 also decided to ratify—and enforce–the duty free alcohol ban, the results could be devastating not just for Patrón, but also for Sauza, Brown-Forman (El Jimador brand), and Jose Cuervo, as well as all spirits suppliers, duty free retailers, and airports.

While it seems likely that the World Health Organization’s Executive Board will ratify the alcohol ban proposal, it seems unlikely that any countries will actually enforce it.

From: Hotel F&B Marketing: Sprucing Up F&B Sales

Hotels find effectively merchandising food and spirits and getting staff involved in the story behind the product directly affects the bottom line.

By Mary Boltz Chapman, Contributing Editor — Hotels, 6/30/2009 11:00:00 PM

When The Peninsula Chicago began offering single-malt scotch flights, its public relations staff spread the word through local newspapers and magazines. Its finding, however, was that the best marketing is the buzz that spreads through the bar when someone orders it: Three 1-ounce pours in etched glasses are stacked on a handcrafted wooden ladder.

“We knew it would take off,” says Director of Food & Beverage Pradeep Raman. “We started getting regular guests ordering it, which attracts onlookers.”

The Peninsula created the flights and added them in October to try something unique for its guests, whom Raman describes as “urban yuppies. A mixture of affluent younger generation who come in with friends and businessmen entertaining clients.” Nine flights, ranging from US$25 to US$95, were assembled to take customers “on a journey.” Each flight holds three scotches ranging in complexity. They are grouped by region, body or tasting notes.

Raman says the flights are selling well, at a pace of about five to 10 on weekdays and 20 or more on weekend days. He credits in part the merchandising that happens when a guest sees someone else drinking it. The server or bar manager will walk customers through the experience, discussing each single malt and its characteristics. Guests also receive a card listing details on each scotch.

The handcrafted, etched glassware bearing the hotel’s name is prominently on display behind the bar, and bartenders are happy to tell inquiring guests about the flights.

Home-Grown Merchandising

At Doubletree Hotel Chicago Magnificent Mile, bar staff also serve as marketers, telling the story of the infused vodka flights featuring flavors grown on site.

Executive Chef Scott Walton grows vegetables and herbs in a deck garden for the hotel’s Markethouse restaurant. Taking a cue from the restaurant’s seasonal slant, Walton began infusing vodkas with fruits from local purveyors for the hotel bar, which was completed in December. A recent US$15 flight included raspberry, vanilla and pomegranate.

This summer, Walton will include infusions from the fruits of his own labor, such as lemon balm, chocolate mint and tomatoes. He also is planning a bacon-infused vodka with pork from a local farmer. Flights combine flavors from savory to sweet.

Walton says depending on flavor, the bar goes through a decanter of infused vodka every seven days. As at The Peninsula, glassware set out on the bar and customer buzz act as merchandising.

Full story here: http://tinyurl.com/ylacv34

In reading the article below today, I find myself curious know, and understand, the key differences and distinctions between this new “Luxury” Tequila brand and all the many others that have traveled this road before it.  Perhaps you can distill it out of the below article or their website.

Please (really) post your comments back at the appropriate section below. I really want to know what I’m missing here.

I’m not trying to be a PaQui buzz kill, but much like life, unless a brand is born from “Luxury Linage”, it is a long, hard, “New Money” road to Luxury status.  So, you’re either born with it or you have to buy into it. And, for the many owners of Tequila Brands out there, they just don’t have the resources, or the patience, to make their way into Luxury Brand status.

Therefore, the bigger question here, “What does it really take to make a Luxury Tequila brand?” is at the core of what many in the biz fail to grasp completely.  They believe that if people like it and they price it the same as Patron, it somehow magically becomes so.  It is by far a more complex sum of factors that eventually, equates to a luxury brand, …or not.  It’s a dynamic process where the building of a luxury brand takes a lot of money, money, money, marketing, and time. Did I mention money?

So, just how does one go about building Luxury brand status for ones muy fabuloso Tequila?

Well, for those out there that care to know, here is the not so secret recipe to establishing a Luxury Tequila Brand:

Ingredients:

• 1 Good quality Tequila recipe

• 1 Good quality & consistent set of ingredients

• 1 Good quality distillery

• 1 Set of replicable processes that will produce a consistent, quality product

• 1 industrial produced bottle, trademarked

• 1 Consistent Message

• Great Global Distribution system

• Money ($10-20M/Yr.)

• Time (10-20 years)

   

  Directions

1. Preheat distillery, add quality ingredients, apply good Tequila recipe. Stir

2. Using replicable processes, make Tequila, set some aside in barrels to age

3. While waiting for Tequila, produce distinctive trademarked industrial bottles and closures

4. Use some of the money to buy into a great global distribution system

5. Fill Tequila bottles and ship to Great Global Distribution system

6. Sprinkle Consistent Message liberally with money, add Time

7. Wait (about 10-20 years)

As always, your thoughts and comments are most welcome.  Now for the article:

Making People Happy Through Tequila? ‘PaQui’ Says ‘Si’

Dec. 10, 2009, Jeremy Nisen–HispanicBusiness.com

Dr. Javier Martinez was born in Mexico, but has lived in England. His journeys have taken him from the business sector into the study of politics, in which he earned his doctorate. But Dr. Martinez’s path has led him back home, at least in a career sense. While he currently lives in Los Angeles with his wife and children, he’s heard and answered the call of his family business. Dr. Martinez is the President and CEO of Tequila Holdings, Inc., the company behind the new luxury brand known as PaQui.

PaQui, which is an Aztec word for “to be happy,” is Dr. Martinez’s answer to the opportunity he sees in the American alcohol market. It’s been on the market for only five months, but its creation was a long time coming.

Starting in 1997, from his position as an importer and distributor of bulk tequila brands, Dr. Martinez saw the shift in the premium tequila landscape, wherein brands like Patron began to take off.

“We, in Mexico, were not realizing how exciting the word ‘tequila’ is to the American consumer,” said Dr. Martinez. “I sensed potential was huge in the U.S.” At about 6 percent of the market, luxury tequila is the fastest-growing category, says Dr. Martinez, “but the base is small.” His segment of the market, he believes, could be 10 percent in the next 10-15 years.

Patron, says Dr. Martinez, got the packaging right. With PaQui, he sees an opportunity to make a similarly beautiful bottle, but pair it with a tequila that he feels “represents the best of the industry.”

“I thought, ‘Let’s bring tequila back to tequila,’” Dr. Martinez explained to HispanicBusiness.com, noting that his priority is to highlight the agave,

“Vodka is neutral, for example,” he said, “but tequila — particularly white tequila — is very rich in flavor and aroma compounds.”

PaQui is made with a process he calls “selective distillation,” a method that his company spent two years developing. The result, said Dr. Martinez, is “very drinkable, clean, smooth, and finishes with ‘I need some more!”

It’s a far cry from the tequila many people aged 35 or older may have experienced. The perception imparted in the 1980s and 1990s by lower market brands, notorious for causing headaches, is what PaQui — and indeed the Mexico-based tequila industry in general — is attempting to overcome.

“The consumer trading up,” said Dr. Martinez, “for less quantity, more quality.” Those making high-end, premium tequila are attempting to answer that call.

For the neophyte premium tequila drinker, Dr. Martinez says “the ’silvera’ first.” That will give the best idea of what the agave plant tastes like. From there, consumers can figure out how they prefer drinking it — trying it neat or with ice or in a margarita.

“One of the advantages of good tequila is that it’s very mixable,” Dr. Martinez advised. “You can mix it with almost anything and retain the characteristic of the tequila. Even in a margarita, you can tell what brand is being used. It’s an amazing spirit, unlike any other.”

After trying the silvera, Dr. Martinez said should a consumer want to experience “more exotic flavors,” try the “reposado,” which is slightly aged and retains some flavors imparted by the wood barrels used in the aging process. After that, one should try the “anejo,” which has been aged even more.

Source: HispanicBusiness.com (c) 2009. All rights reserved.

Read the rest here:

http://www.hispanicbusiness.com/news/2009/12/10/making_people_happy_through_tequila_paqui.htm#

According to figures released by Herradura, the number of cases of tequila exported annually are…

1. US 11.5 million

2. México 7.5 million

3. Germany 450,000 

4. Russia 300,000

5. Canada 250,000

6. France 200,000

7. Greece 190,000

8. Japan 150,000.   

Of worldwide tequila production, Mexico bottles 33% while the United States bottles 51% as bulk mixto. 

However, figures released by the CRT (Consejo Regulador del Tequila) state that from January to October of 2009, there was a 19% drop in tequila production from 2008.  

A reporter for Excelsior Online recently commented in his column that despite Mexico’s economic drop of 7% during the recession, as of October 2009, sales of tequila have increased 10% over last year. While this columnist attributes the rise in tequila consumption to consumers trying to make the recession more bearable, others in the tequila industry are more optimistic about the future.

Juan Beckmann Vidal, president of Casa Cuervo, sees enormous worldwide potential in the exportation of the Spirit of Mexico, particularly into Asia.  He foresees the annual sales of 137 million liters of tequila to double in the next five years.

With the current instability of each country’s economy, it will be interesting to see what the final production figures are at the end of 2009.

Will KIRKLAND prove to be the category killer for high-end Extra Anjeo like it has for ultra-premium Vodka? As you can see from the below insert from December’s Costco Connection magazine, Kirkland 3 year Anjeo hits the shelves in select US markets. In CA it is currently selling for $23.99 per bottle.

I’m sure to buy one to put on my ever expanding Tequila shelf, most likely next to “Black Death Tequila” and others of similar ilk. I’m also sure to do a proper tasting and write down my thoughts to share with you as a future commentary to this article.

But the thought I have for you to ponder today is simply this: Why didn’t Costco start with Blanco? Blanco is the largest volume category style of 100% Agave Tequila by far. It is also much less expensive to produce, and much easier to maintain product consistency and taste profile (due to the differences in barrel wood, especially amplified over three years).

My best guess is that Costco wants to accomplish two things: apply pricing pressure to the high end that will ultimately drive down all other Tequila pricing, and… Costco does not want to mess around with the volume and profit surrounding the massive amounts of 1.75L Patron Blanco that it sells through its stores.

Your thoughts?

UPDATE:

So, as an update to our most recent topic above, “How low can the price of Tequila go?” now that the new Costco 3yr Anjeo is out in stores @ a very low $23.99/L. Simple Economics say that this pricing pressure at the high-end will no doubt exert pricing pressures throughout the tequila markets where Costco sell Liquor.

Well, I believe the next shoe, Premium Mixto Pricing, has just dropped.

In the mail today, courtesy of this week’s Ralph’s grocery flyer, Sauza Gold Premium Mixto is featured for a mere $6.39 a bottle with a -$3.00 instant redeemable coupon (that arrived in the same flyer bundle), for a net price to consumer of only $3.39 / 750ml.  Stater Brothers Holiday Ad features Sauza for only $2.99 net after both a Southern Wine & Spirits -$3.00 in ad coupon plus the manufacturers -$3.00 instant redeemable coupon.  At these prices, which are very near the cost of production after taxes, bottle cost, shipping, its really time to stock up on every segment now through Q1 of 2010.

Perhaps this is the answer, at least the near term, regarding the low end of Premium Mixto Tequila pricing.

If it gets any cheaper, we may all find ourselves giving a whole new meaning to “Two Buck Chuck”(up?) Tequila. – Z

A picture of the article can be found here: http://tinyurl.com/y9ngesy

Link to the Costco Connection article can be found here: http://tinyurl.com/yzyrrc6

The Distillery site is here: http://www.fabricadetequilasfinos.com.mx/