The Tequila Revolution From High-End To Low, Trade in Tequila Never Has Been More Profitable On-Premise
By Michael Harrelson
Unlike the stock market, which has witnessed numerous ups and downs in
the past two decades, the domestic trade in tequila can be charted by
an indicator arrow pointing almost straight up in the 20-plus years
since premium and super-premium brands began arriving in U.S. bars and
clubs from Mexico.
The only dip on the economic graph for tequila futures came in 1998
when a fungus struck mature, agave fields in Mexico — reducing supply
at a time when demand for tequila was rising sharply in the United
States. Not surprisingly, this blight resulted in sharply rising prices
of the juice used to make tequila.
But even this short-lived tragedy had a silver lining for the
South-of-the-Border spirit. “Prices of 100-percent blue agave tequila
have been commensurate with the price of fine Cognac ever since,” says
noted American Spirits Writer Robert Plotkin.
Proof of tequila’s liquid gold status can be tracked in its sharply
rising sales volume as well. The tequila category was up by 5.8 percent
— to 8.5 million cases in 2004 — according to figures compiled by the
Distilled Spirits Council of America (DISCUS). And revenues from these
sales shot up 7.4 percent to $1 billion.
As impressive as these statistics are, however, the really head-turning
numbers are those that the DISCUS reported for the super-premium
segment of tequila. Sales of high-end tequila rose by 5 percent in
2004 to 522, 000 cases — just eight-tenths of a percentage point
shy of equaling the increase posted by the red-hot tequila category as
a whole.
Numero Uno
Much of tequila’s success on-premise still is owed to the virtually
bottomless popularity of the Margarita — which eclipsed its nearest
rivals sometime in the 1980s as the most popular libation in the world
and hasn’t looked back since.
Whether basic or house, frozen or on-the-rocks, this classic blend of
sweet and sour, Triple Sec and tequila still packs quite a sales
wallop. At c.o. jones, a popular Margarita and tequila bar and
restaurant located in New Haven, Conn., the Margaritas account for 70
percent of owner Bob Potter’s annual sales of between $500,000 and
$600, 000.
Along with the healthy Cal/Mex fare, this favorite haunt of students
from nearby Yale University offers the full range of Margaritas — from
generic to house — served up either frozen or on the rocks — depending
on the season and the preference of the individual guest. House
specialties such as the Blood Orange Honey Margarita and the Key Lime
Pie Margarita ($4.75 for 12-ounce and $7.75 for 20-ounce) feature Sauza
Silver as the base spirit with graham cracker crumbs substituted for
the rim of salt in the Key Lime version. Referring to his Blood
Orange Honey Margarita, Potter says, “People like it. Margaritas tend
to be on the tart side, and the (honey) sweetens it up.”
Even with their generic Margaritas, however, bartenders at c.o. jones
go the extra mile to give customers their money’s worth. “The thing
that separates our (basic) Margaritas from other (venues) in the area
is that we make our own sour mix. It just gives you a better-quality
Margarita.”
Flights of Fancy
The sexy, super-premium, sipping tequilas — Patrón, Herradura, El
Tesoro, Cabo Wabo, Cazadores, Oro Azul, Tequila Corralejo — are well
represented on c.o. jones’ back bar as well, with more than 60 brands
in stock. In fact, Potter says he probably carriers every tequila label
allowed under the alcohol regulations mandated by the state of
Connecticut.
Thanks to its aggressively promoted tequila tasting flights, Potter
says c.o. jones regulars are clued in to the basic trilogy of
nomenclature — blanco, reposado and añejo — know to every tequila
aficionado. The flights make sense for a number of reasons, Potter
says, not the least of which is price. “Tequila is a lot more expensive
than most (high-end) vodkas. Some of the reposados and añejos — a shot
is anywhere from $7 to $20.”
With the flights — three half-ounce pours served in shot glasses —
guests can try any number of tequilas in the various categories without
busting their budgets. And as Potter is quick to add, “remember
what they had the next day. If they did all three, they are going to be
drunk in no time. It gives us a chance to educate customers as to the
different tequilas.”
And educate them he has. “I would say the top sellers are Patrón.
Patrón has put out a triple-distilled tequila. It is a blanco tequila,
but since it is triple-distilled, it is incredibly smooth. It is called
Patrón Platinum, and that goes for about $20 a shot.” Other top sellers
include Herradura and Cabo Wabo — a tequila brand popularized by its
owner, Red Rocker Sammy Hagar. “We sell a lot of the blanco,” Potter
says. “That goes for about $8 a shot.
Lately, however, Potter says the biggest buzz is over Legenda del
Milagro, a 100- percent blue agave tequila distilled to the legendary
specifications of El Milagro, an ancient recipe found buried in
the blue agave fields just outside Guadalajara. “One of the reasons it
is popular is the packaging. It is a large bottle — a 1.5 liter bottle
— and it stands quite tall. It gets noticed on the back bar. We sell
lots of it for our (call brand) Margaritas.”
As tempting as the margins on high-end tequila pours are today amid a
virtual tequila revolution in the United States and elsewhere, Potter
has found ample incentive not to cop a snobbish attitude about tequila
in the six years he has operated the “fun” — in Spanish c.o. jones or
“cojones” is slang for balls — 1,600-square-foot venue.
“I stock the basics (1800, Jose Cuervo) because people know them. It
(the education process) starts with the well and value brands. And then
we try and upsell them.”
As one of the first venues in the New Haven area themed specifically as
a Margarita and tequila bar and restaurant, Potter has established only
one unbreakable rule relative to Margarita and tequila sales. “We won’t
make a frozen Patrón or Herradura Margarita,” Potter says. “Nine times
out of ten, you are going to put strawberry or raspberry in it, and it
is going to hide the taste of the tequila. It’s a sacrilege.” NCB
Judging Tequila
The results from the latest San Francisco World Spirits Competition are
in, and here are the winners in the tequila category for 2005.
Congratulations to each of these fine brands. For supplier details and
other information on these winning tequilas, log onto
sfspiritscomp.com.
DOUBLE GOLD
• White El Tesoro Platinum Tequila (Best Tequila and Best in Show)
• El Conquistador
Reposado Tequila
• El Tesoro Añejo Tequila
• El Tesoro Reposado Tequila
• Herradura Silver Tequila
• Herradura Seleccion Suprema
