Tequila has been on a strong premiumisation path in domestic markets, but is this success being replicated in the global travel retail channel?

*This feature was originally published in the April 2024 issue of The Spirits Business magazine.

Overall, since the end of the Covid-19 lockdowns, it’s clear consumers’ appetites for travel have not abated. Nevertheless, despite the hustle and bustle of airports worldwide, there is still some way to go until the global travel retail (GTR) channel fully recovers from its pandemic decline.

“There is plenty of positivity around duty free and travel retail at the moment,” Erik Juul-Mortensen, president of the Tax Free World Association (TFWA), said during the TFWA’s World Exhibition & Conference in Cannes last year. “People are hungry to travel again, as shown by the healthy results many airlines have reported [in 2023], but we are not quite back to where we were in 2019.”

In 2023, international passenger numbers rose by 41.6% on 2022’s figures, according to International Air Transport Association data. But the 2023 numbers were only 88.6% of the levels seen in 2019, before the pandemic.

While passenger numbers might be down, Tequila is on the up. The category was the only spirits segment to have recovered to pre-pandemic levels in 2022, when it grew by 95% in volume, according to IWSR Drinks Market Analysis. By comparison, the category’s GTR growth in 2019 was approximately 12%.

Premiumisation in GTR is also prominent – not just in Tequila, but in many spirits categories. Jairo López Suárez, head of GTR insights, IWSR Drinks Market Analysis, says: “After Covid, and as a general trend observed in all categories in travel retail, many brand owners are focusing on premiumisation to protect their profits from challenged volumes. The appearance of more GTR-exclusive brand lines, standalone boutiques or pop-ups in GTR environments are all indications that brand owners are seeking to target not only the high-end drinker, but also the more luxury shopper. Tequila is not an exception to this trend.”

Bacardi-owned Patrón Tequila commands 45% of Tequila’s super-premium market share in GTR, which marks an 11 percentage point growth since 2021. “We believe Patrón has the credentials to be the transcendent brand that unlocks every aspect of Tequila potential in GTR, not only for itself as a category leader but also in growing the size of the prize for the entire category,” says Claire Chabane, global brand manager travel retail at Patrón. “Tequila is on fire across the globe, as IWSR 2022 statistics demonstrate: 9.4% compound annual growth rate (2023-2030).”

Patrón El Cielo (40% ABV) was the latest innovation from the brand last year. Made entirely from Blue Weber agave, the blanco Tequila was distilled four times – a first for the Tequila category. “Bacardi has huge ambitions for Patrón Tequila in GTR, underpinned by leveraging Patrón’s category leadership to create the super-premium Tequila category, with rapid expansion into new markets outside the Americas, and a strategic focus on prestige innovation – and the travel retail industry is responding extremely positively to our latest innovations, led by the launch of Patrón El Cielo,” Chabane adds. “We are rapidly expanding its availability beyond the core market of the Americas, into Europe, the Middle East, India, and Asia Pacific.”

Key international hubs

Last month, Teremana, the Tequila brand co-founded by Dwayne ‘The Rock’ Johnson, made its GTR debut via investor Mast-Jägermeister, as part of the brand’s internationalisation strategy. “With our activation, we are focusing on key international airport hubs to engage with as many travellers as possible in our Teremana ‘Share the Mana’ story,” explains Tobias Witte, Mast-Jägermeister vice-president GTR. “We have seen the steady increase of Tequila in GTR in recent years and are focusing on the forecast continued growth in this category.”

But what are GTR consumers looking for from premium-plus Tequila brands? “Quality, provenance, taste, something new and special,” believes Witte.

Whether Tequila is taking any significant market share from other spirits remains to be determined. When asked if Tequila was taking market share from other categories, IWSR’s López Suárez notes: “China’s prolonged lockdowns had a significant impact on the recovery of other key GTR categories, such as brandy, Cognac, and whisky.”

In terms of market performance, according to 2022 travel data cited by IWSR, 35% of the total Tequila volume in the GTR channel was sold in the US. Mexico was the agave-based spirit’s second-biggest GTR market, accounting for approximately 18%. (In domestic markets, the US and Mexico are also the category’s two biggest countries).

While IWSR does not track the GTR channel by state, López Suárez did single out border stores between the US and Mexico as showing potential for growing demand. “We would expect to see more demand for Tequila in airports with high domestic traffic, and in cruise ports with routes through Mexico, the Caribbean, and South America,” he says.

Bacardi’s Patrón plans to continue expanding its presence in GTR, particularly with new innovations, such as Patrón El Cielo, “to lead the category in India, as we have done in the Americas and Europe”, says Chabane.

Newer Tequila markets, such as Asia Pacific and the Gulf, where Tequila is not yet fully appreciated or understood, will also be high on the brand’s GTR agenda in 2024. “GTR is such a discovery channel for consumers, a front door to new experiences, especially when we partner with retailers to invest in engaging activations, and through our investment in fully brand-trained retail ambassadors,” Chabane adds.

Will growth continue in 2024? It looks very likely, as López Suárez adds: “We expect Tequila to have significant growth off a relatively smaller base in the coming year.”

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