The Commoditization of Tequila Courtesy of Costco
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/
November 30th, 2009 at 1:08 am
An importer that I know who had negotiated with Costco about 2 years ago for a private label blanco explained that the distillery owners whose tequila he imported refused to cut corners in order to meet Costco’s volume requirements.
Also, Costco was looking for quality juice but wasn’t willing to pay what the distillery owners believed to be a fair price for it. I assume that Costco felt that with the amount of volume they felt sure they could generate would be enough to entice any distillery to agree to their terms.
Costco is extremely lucky in this situation. When they first explored the tequila market, the añejo and extra añejo categories were hot and growing exponentially. They were not getting a piece of that pie, and they knew it. What better way to take a bite out of those categories than with their own private label añejo tequila.
Now, with the economy going south, they are perfectly positioned to not just take a bite, but a significant mouthful!
You’re correct in that the blanco category is driving the 100% de agave segment at this point in time, but consider this…
It is much easier to “polish” and “blend” an añejo thus masking any imperfections in a blanco.
While I’ve not tasted the Costco brand añejo, I would immediately question its quality.
Looking forward to your tasting notes soon.
November 30th, 2009 at 7:46 pm
Guys, On the “Tequila Whisperer” Show I have recently done a pretty in-depth review of the Kirkland XA alongside the Trader Joe’s Distinqt repo. Results will not surprise you (at least the Kirkland verdict won’t!)
Check out the reviews here:
http://tequilawhisperer.wordpress.com/2009/11/13/battle-of-the-bottom-feeders_01/
SalUD!
lippy
December 11th, 2009 at 10:05 am
Well, here is the very quick down & dirty on the tasting notes:
Tastes like Dos Manos: http://tinyurl.com/y88hr23
These differ in name, but there the difference ceases — the dances are precisely the same.
Unbelievable? Shocked? I’m curious to know what others think.
December 11th, 2009 at 10:59 am
Ho about calling that new mixt, “Two buck UP-Chuck”?
December 11th, 2009 at 1:10 pm
Ah, the wonders of maquila tequila!
Having had Dos Manos at this distillery when it was a mixto, I can truthfully say that it was fine–as jewelry cleaner!
I hadn’t tasted it since it was refomulated into a 100% de agave tequila, but I would be very hesitant to try any more of it in whatever incarnation.
The reviewer of this brand on Tequila.net was no doubt too gracious in his evaluation.
December 13th, 2009 at 10:11 am
Most tequila reviewers are WAY too kind about most brands, IMHO!