Examining Premiumization Within the Tequila Category
While the liquor category as a whole has seen premiumization in recent years, tequila is a standout when it comes to consumers trading up
Tequila is on the rise—in particular, premium-priced tequila, making the category one of the top for producers to keep track of going into summer and the rest of 2022.
“While the average price point of tequila was already on the rise pre-2020, the pandemic certainly fueled premiumization in this category,” says Liz Paquette, Drizly’s head of consumer insights. “As consumers were staying home more and spending less on categories like dining out and travel, many splurged on alcoholic beverages to drink at home at the same time as at-home cocktail making was taking off, driving growth of spirits sales overall, and particularly tequila.”
With the increase in interest came an increase in the number of options available to consumers. In the past 12 months compared to the previous 12 months, the number of SKUs in Drizly’s inventory has grown by 10.5 percent for silver/blanco tequila, 11 percent for reposado, and 15 percent for añejo—the last of which tends to carry the highest price tag.
“Consumers come into the category at the entry level with shots and cocktails and start to learn more,” says Gary Feeney, the brand manager for Avión Tequila. “They realize there are more options out there, and some of the big brands are likely seeing input from whiskey consumers now.”
A Growing Average Price Point
The mezcal and whiskey categories, both of which are competitors to tequila, have high average price points at $50.80 and $38.30, respectively, but they haven’t seen the same rate of average price increase as tequila. Over the past five years, the average unit price of tequila sold on Drizly has grown 29 percent.
“Over the past five years, mezcal is up four percent and whiskey is up five percent,” Paquette says. “With tequila up nearly 30 percent in the same time period, it has seen significantly more premiumization in recent years than these categories.”
Drizly’s Average Price Point for Tequila, Last Five Years
- 2022: $49.17
- 2021: $46.66
- 2020: $41.22
- 2019: $39.32
- 2018: $37.97
A whopping 27 percent of all tequilas sold on Drizly carry a price tag of $100 and up. Within the sub-$100 price range, the $40 to $50 price range and $50 to $60 price ranges are the most popular, holding 17 percent and 16 percent of share, respectively. Just three percent of tequilas on Drizly sell for between $10 and $20.
Every tequila subcategory has seen an increase in average unit price on Drizly, but some categories have made gains faster than others. The silver/blanco subcategory, for example, has seen less of a price increase (22 percent over five years, sitting at $39.79 in 2022) than reposado (57 percent, sitting at $60.88 in 2022) or añejo (25 percent, sitting at $101.39 in 2022). The gold tequila subcategory has seen the lowest price increase at 16 percent over five years and now sits at $25.48 in 2022.
Higher-priced tequila subcategories have also seen share growth on Drizly in recent years. Reposado went from 25 percent share in 2019 to 30 percent share in 2021, and the priciest subcategory, añejo tequila, saw its share of sales in the tequila category on Drizly rise three percentage points year-over-year to a 19 percent share.
Even the flavored tequila subcategory has seen a significant price jump on Drizly. Over the past five years, flavored tequila’s average unit price rose from $27.54 in 2018 to $34.74 in 2022—an increase of 26 percent.
Trends Helping Tequila Premiumization
Trading up to higher subcategories as well as gifting has helped the average unit price of tequila rise. Añejo tequila in particular has been boosted by gifting; over the past 12 months, 26 percent share of añejo tequila sales were gifts, compared to a 16 percent share of tequila overall, and an 11 percent share of the total liquor category. Don Julio 1942 in particular is a top choice for gift orders (helped by many celebrities choosing the bottle for birthday and other celebrations).
Other category trends have seen the tequila influence, too. “Though they don’t technically fall within the tequila category, tequila’s popularity can be seen in the skyrocketing ready-to-drink (RTD) cocktail growth we have seen over the past year, with many tequila-based SKUs leading sales,” Paquette says. “In terms of premiumization, we have seen that consumers are willing to spend a bit more for spirit based canned cocktails versus hard seltzer.”
Celebrities are another factor to consider. According to Paquette, the only other category with as big of a celebrity influence on Drizly is rosé. The top five celebrity tequila brands on Drizly are Casamigos, Teremana, Cincoro, 818, and Codigo 1530.
Feeney adds that celebrity tequila brands have helped raise awareness of the category overall. Even brands that aren’t backed by celebrities can see a higher interest because the celebrity brands like Casamigos and Teremana have created new tequila drinkers that then want to explore the category further. Avion’s recent launch of Reserva Cristalino is an example of how the Avion brand continues to lean into the growing category, with a prestige offering of crystal clear tequila that retains the taste and aroma of a barrel-aged liquid.
Who Is Buying Premium Tequilas?
The insights team at Pernod Ricard, which owns tequila brands Avión and Altos, had Numerator build shopper groups by price tier. They used that to see which shoppers were looking for a specific price per unit between March of 2021 and March of 2022. Super-premium fell in the range of $26 to $39.99, premium between $40 and $89.99, and prestige at $90 and above.
The research found that ultra-premium and prestige tequila shoppers over-index in the 35- to 44-year-old age group, and the same age group is the most likely to purchase tequilas in the prestige category. Shoppers also over-index in the $125,000 household income bracket and over-index among shoppers who identify as multicultural compared to the broader tequila category shopper.
In terms of location, prestige and ultra-premium shoppers are more likely to live in urban areas.
Data from Nielsen that was acquired by Pernod Ricard found that while total spirits sales have gone up in value and volume, tequila outpaced the overall liquor category in both as consumers trade up to higher price points.
To best capitalize on tequila premiumization trends, Paquette suggests retailers build out their reposado and añejo inventories in addition to blanco SKUs.