The international rise of tequila; Australia a "major growth market"

Tequila is poised for growth in markets outside the US and Mexico, according to international drinks market analysts IWSRs latest forecasts.

Eighty five per cent of the world's tequila is currently consumed in the US and Mexico, and IWSR predicts tequila will become the most valuable spirit in the US this year, overtaking whiskey and vodka.

Tequila sales in international markets such as Canada, the UK, Colombia and Australia are expected to grow at a compound annual growth rate (CAGR) of between 7 and 9 per cent between 2022-27, while the US will still dominate with an expected growth rate of over 9 per cent.

Jose Luis Hermoso, Research Director at IWSR, said tequila producers are hesitant to invest in markets outside the US, despite evidence of growth, as sales continue to be strong closer to home.

"There is no real incentive for brand owners to invest in countries further away if they can make money closer to home. While tequila continues to be strong in the US, this market will take priority over anything else – and we have seen this in the last couple of years, with some brands limiting supply to certain markets in order to feed liquid to the US," he said.

Adding to producers' concerns, the high price of agave and supply constraints has continued to frustrate as many hoped for some relief in costs this year.

As long as consumption continues to grow, agave supplies will be constrained, inflating prices and limiting the expansion opportunities of brands into other developing markets for tequila.

Bob Kunze-Concewitz, CEO of Campari, said: "Whilst we are currently constrained on tequila, we are able to support the strong double-digit growth of Espolòn in the US, and look forward to substantial additional capacity coming online in the second half of the year [2023], which would allow us also to support the international expansion of the brand," he said.

Michael Merolli, CEO of Pernod Ricard's House of Tequila, said: "I think we are now on a slight downward trend in terms of the cost of agave."

Pernod Ricard and others in the industry have been busy planting their own agave to ease future supply volatility. Pernod will start using this for the first time in 2023, and Merolli said: "In the coming years, we are quite confident that the [agave] prices are going to come down."

Despite the continued strong focus on the US market, brand owners are keen to expand into other territories when possible. Kunze-Concewitz said: "Australia is a major growth market, and … we see a lot of positive momentum in Mexico with the development of the cristalino segment for Espolòn.

"This is also why we are accelerating our medium-term capex across the supply chain to overall double capacity for our key categories, including tequila, and to be able to better support all our priorities around the globe," he said.

The president and COO of Bacardi-owned Patrón, Mauricio Vergara Herrera, is confident about the prospects for Australia – another market that the IWSR expects to register consumption growth over the next few years.

"Australia is one of the markets that carries a lot of influence in Asian markets," said Vergara Herrera. "With tequila becoming more and more popular, together with other global trends, we expect Asia to follow the global and growing popularity of tequila."

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