Patron’s Tequila to Push More Beer, Autos Off U.S. Billboards
By Andrew Cleary
Nov. 26 (Bloomberg) – Patron Spirits International, which outspent all other U.S. liquor brands on marketing last year, plans to grab more “blockbuster” billboards, ousting auto, phone and beer ads to catch up with tequila rival Jose Cuervo. Patron, controlled by shampoo billionaireJohn Paul Dejoria, this year gained control of a 225-foot-tall billboard, New York’s largest, near Penn Station. Formerly held by AT&T Inc., the billboard says shoppers can “eliminate regifting” by buying Patron for their loved ones this weekend, the busiest of the U.S. Christmas shopping season. Clear Channel Outdoor Holdings Inc. says such a billboard can cost $1 million a year. Chief Operating Officer John McDonnell said the third- biggest U.S. tequila maker is raising its marketing budget by 10 percent to secure similar billboards in the 10 biggest U.S. spirits markets. Sales of Patron, which costs between $40 and $500 a bottle, rose 10.6 percent in the year to Sept. 6, Chicago-based researcher Information Resources Inc. says. Patron is “taking advantage of opportunities that haven’t been available in the past, like choice outdoor locations,” McDonnell said yesterday. “Increased awareness and exposure is very much attributable to our advertising.” Las Vegas-based Patron may pick up sites being vacated by automakers, he said. A Patron ad replaced Heineken NV on a billboard above the I-93 expressway in McDonnell’s home town of Boston last year. Heineken, which is cutting costs like advertising to stay profitable, saw U.S. sales of its Dutch beer plunge 12 percent by volume in the first half. Diageo Plc, the largest liquor maker and Cuervo’s U.S. distributor, cut its marketing spending by 9 percent in the year ended June 30. Seagram Veteran For Patron, “it is particularly smart to increase that spend,” said Tom Sebok, chief executive officer of advertising firm Young & Rubicam North America. “Those who are aggressive will get long-term dividends. Those who aren’t will have a much harder time clawing back in better times.” Patron, which also owns Ultimat vodka, may buy more brands, McDonnell said. The veteran of Seagram Co. said the company has no debt, and declined to provide sales or profit figures. Larger tequila rivals Casa Cuervo SA de CV and Fortune Brands Inc.’s Sauza, which both sell for less than Patron, saw their revenue decline 2.4 percent and 8.9 percent, respectively, while total U.S. liquor sales rose 1.6 percent over the same period, according to Information Resources. Patron is also spending more to secure inside covers and pull-outs in magazines including GQ, Sports Illustrated, and Forbes, McDonnell said in an earlier interview in London. “You have to have these blockbuster positions,” he said. The company generates 90 percent of its revenue in the U.S. and spent $50.9 million on advertising its tequila in 2008, more than any other liquor brand, Taylor Nelson Sofres Plc says. READ MORE HERE: http://tinyurl.com/ydg8elj
Tags: advertising, billboards, marketing, Patron, tequila
November 26th, 2009 at 8:13 am
$50.9 million on advertising its tequila in 2008. Which means that the first 509,000 bottles of Patron sold just about covers the marketing expense.
December 1st, 2009 at 8:17 am
It appears that Patron is spending somewhere north of $40/case on marketing which based on my research suggests they are spending between 10% to 20% more per case then the industry average for “large growth brands” which is probably closer to $35/case(in 2008).
When you are doing close to 1.3 million cases(full portfolio)this is not an outrageous spend. Given the vertical integration they now have:
· They now have their own distilleries
· Bottles are made on site (satisfying at least a portion of their volume requirement)
· Mature distribution (probably SWS most important customer/supplier right now)
· Dropping prices on agave .01 per kilogram
This brand is probably dropping something north of $30 per bottle as net revenue (after cost of goods, shipping, customs, etc.) which would give them a gross profit number of probably $300 per 9 liter case … even if it half that $50 per case on marketing is nothing. Said another way … they are frickin profitable out the wazoo
· Gross sales are probably between $400 and $500 million per year now
· Marketing spend of 12.5% of gross sales is pretty typical in consumer products (non-durables) which would translate to about $50 million on the low end and $65 million on the high end
· Even if all other expenses were another 30% which would be a big number they are achieving $200 million plus in gross profit … privately held
I wonder how Patron profitability compares to their hair care products biz?