Nov 17, 2023 3 min read

On a Night Out, Americans Want Tequila. Will the World Feel the Same Way?

For the first time in history, tequila is on pace to become the most purchased spirit in the United States. Can it replicate success around the world?
On a Night Out, Americans Want Tequila. Will the World Feel the Same Way?
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When Debra Crew was named CEO of Diageo, she was nothing short of ambitious. She wanted to make tequila the dominant liquor brand around the world. For the majority of people in North America, this may come as a bit of surprise, but the U.S. and Mexico currently make up 85% of global tequila sales. But, for the first time in history, tequila is on pace to become the most purchased spirit in the United States, taking over from vodka and American whiskey. According to beverage tracker IWSR, total tequila sales will hit a whopping $13.3 billion this year.

Diageo currently owns tequila brands Don Julio and Casamigos, two of the largest players in the space. In 2014, tequila comprised just 1% of Diageo net sales. However, in 2017, Diageo made a massive investment, purchasing Casamigos for up to $1 billion. In 2023, tequila net sales has jumped to about 12% and has contributed to 33% of Diageo’s growth over the past four years. (Wall Street Journal)

Even in the United States, Diageo believes tequila is in the early innings for growth. High quality brands like Casamigos have changed opinions on who tequila is for and when it is drank. According to Ivy Mix, co-owner of Leyenda bar in Brooklyn, “Casamigos changed the game. “Patron made tequila mainstream for young people but with Casamigos suddenly the Midwestern soccer mom is drinking tequila.” (Wall Street Journal)

Diageo is finally prepared to meet the tremendous demand that they previously struggled to. Without getting too technical, the agave plant, the main ingredient necessary tequila, takes 7 years to grow. As Diageo’s major investment in Casamigos was nearly 6 and a half years ago, timing is just started to come into place. As a large quantity of agave plants are maturing, the price that was once 32 pesos per kilogram has since dropped to 18 pesos per kilogram, a massive step in both lowering bottle prices and reaching a new type of consumer.

But the real growth opportunity, for both Diageo and all other tequila brands, remains global expansion. “Tequila is starting to become, I think, a global phenomenon,” Campari Chief Executive Bob Kunze-Concewitz told investors in May. “Consumers are yearning for it.” Diageo is going to target cities such as London, Glasgow, Paris, and Milan as cities that host a significant number of affluent individuals and global travelers.  (Wall Street Journal)

Diageo will obviously face immense competition from other big named brands who see a similar opportunity. Brown Foreman, the owner of El Jimador, launched a campaign in the U.K. this past August while Campari is planning an international expansion campaign for their tequila brand, Espolòn, next year. But put plainly, tequila’s global expansion is inevitable.

The only potential major detriment to the growth of tequila is not competition from other types of liquor but the decline of the overall liquor industry. According to the World Health Organization, the number of alcohol drinkers in the world has decreased by nearly 5% since 2000, an absolutely shocking figure. This is part of an ongoing trend by younger consumers who prefer to live wellness focused lifestyles, with social gatherings not focused on alcohol but instead moderation and productivity the following day. Over the past two decades, young adults (18-34) are consuming significantly less alcohol on occasion, declining from 72% to 62%. (Gallup) According to NC Solutions, 34% of Americans are trying to drink less in 2023, with 25% also curious about the sober movement. (NC Solutions) With the rise of cannabis use, in addition to the widespread availability of nonalcoholic cocktail alternatives, liquor, and specifically tequila, will face a different type of battle when it comes to acquiring young consumers.

However, with the milestone of becoming the most sold liquor brand in the United States, it might not matter to tequila brands. Tequila’s growth has proven that it is clearly not a fad or even a trend, but might become the dominant liquor of the 21st century. And if that is the case, tequila's global takeover is just a matter of time.

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