Tequila Overtakes Whisky and Is On Track to Edge Out Vodka as Favorite Tipple In US

Agave-based drinks sales contributed around $1.6 billion to the US beverage industry in 2022

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Bloomberg Línea — Tequila, the Mexican appellation of origin agave-based spirit, overtook whisky to become the second-most valuable liquor category in the US in 2022, but producers of the drink will have to look to other territories if they want to bet on long-term growth, according to analysts.

The distilled agave drink is on track to become the most valuable liquor category by 2023, which would unseat vodka, according to IWSR, a provider of market information for the industry.

“Agave spirits contributed $1.6 billion to the spirits industry in 2022″, IWSR said in a statement in January.

The growth of agave-based beverages, which includes mezcal, accounted for 70% of the overall volume increase and 65% of the increase in the value of spirits in the United States.

Tequila or whisky?

The path that tequila is following in North America is being seen as the right bet by some manufacturers, who have focused supply primarily on high-value or premium products.

“Our belief in tequila as one of the best premium spirits is proving correct,” said Becle, the maker of José Cuervo tequila, in its Q4 2022 report, citing IWSR results.

José Cuervo’s tequila sales in the United States and Canada, which account for 60% of its business, rose 3.7% in Q4 2022, compared with the same period a year earlier. In the previous quarter, year-over-year sales growth was 14%.

The slowdown in the North American market was reflected in the company’s consolidated results and did not go unnoticed by investors; José Cuervo shares fell 2.3% on the Mexican Stock Exchange on February 17.

Despite this slowdown, José Cuervo maintains a solid position in the North American market, according to Kenneth Shea, a Bloomberg analyst, but who said that, if it wants to grow in the long term, it will have to broaden its horizons, betting on products such as Irish whiskey or whisky.

“Longer-term growth opportunities lie in its ability to expand tequila penetration outside of North America and market premium products in other expanding categories, such as Irish whiskeys,” Shea wrote in a commentary on the company’s results.

The North American tequila market is also important to distiller Diageo. Tequila is the third-most important product in terms of sales for the European company, which manages brands such as Don Julio and Casa Amigos.

In the second half of 2022, sales of the tequila produced by Diageo grew 28%, driven by performance in North America, according to its earnings report.

“Tequila shipments grew ahead of inventory depletion, reflecting strong volume growth as well as a benefit from price increases,” Diageo said.