Tequila’s expansion in travel retail
With travellers returning to the world’s skies and seas, Tequila brands are keen to entice them to try their products, and see activations and campaigns as the way of converting consumers to their liquids in travel retail.
The Tequila sector may account for a small slice of the global travel retail (GTR) market, but the category is starting to gain more shelf space as retailers recognise the potential of agave spirits.
Brands are also taking major steps to attract consumers as they return to travelling, with experiential activations and enhanced online promotions.
The latest data from IWSR Drinks Market Analysis revealed Tequila volume in GTR rose by around 280,000 nine-litre cases in 2021, up from 160,000 in the previous year and the 490,000 it recorded in 2019.
Volume is expected to double to 560,000 cases by 2025.
“Travel retail has become the showcase platform for the world,” says Ruediger Stelkens, director of purchasing, liquor, tobacco and confectionery at retailer Gebr Heinemann. “This is an opportunity for brands to present themselves in their best light, and to create wow effects for all travellers passing through. Anything spectacular will catch our interest, such as a crazy Mexico-themed promotion or, alternatively, presenting the most refined and rare liquid as a super-premium Tequila. Premiumisation is certainly a driver – provided a brand has the potential to do so.”
For Gebr Heinemman, Tequila is among its most improved subcategories compared with 2019.
“Tequila is especially important in outlets where we see American travellers passing through, such as in Istanbul, Sydney and Tel Aviv – and this is expected to pick up even more as intercontinental travel returns in full strength,” Stelkens notes.
The Americas remains a key market for Tequila, according to IWSR analyst Thorsten Hartman, with distributors such as Monarq Group and Webb Banks recognising the importance of the region.
“Our Tequila brands are performing very well, to the point that supply can’t keep up with demand,” says Robert de Monchy, managing director of Monarq Group, distributor of Código 1530 Tequila in Americas duty free.
“We are seeing a growing demand throughout the Americas.”
Jose Castellvi, chief operating officer of Miami-based distributor Webb Banks, also notes that the Tequila market in North America is “riding a similar success rate” to the US market.
Castellvi says many new premium Tequilas have entered the market, but retailers are “being very selective” when it comes to adding new brands.
“The other factor that is affecting current and new listings is availability,” explains Castellvi. “Like so many other categories, supply chain and availability of product has been a continuous challenge with Tequila, with no immediate end in sight. In some cases, customers will list new brands if they cannot rely on the steady demand of their currently listed Tequilas.”
Last year, Proximo Spirits, the US arm of Jose Cuervo maker Becle, targeted two international airports, New York’s JFK and Dubai, with an experiential activation.
The company’s World of Tequila pop-up at JFK featured a 700sq ft retail space that highlighted eight Tequilas, including Maestro Dobel, 1800 Tequila, Jose Cuervo and Gran Centenario.
In Dubai Duty Free, the company showcased its Dobel 50 Cristalino and Dobel 50 Extra Añejo 1969 Limited Edition Tequilas. Proximo is planning “more exciting and innovative activities in 2022”, according to Gordon Dron, managing director, Europe, Middle East and Africa, and Asia Pacific, at Proximo Spirits.
Dron says: “The activation response from passengers exceeded our expectations, with high demand for super-premium and luxury brands. This trend can now be seen across all key regions and hubs, as super-premium and luxury Tequila continue in rapid growth.”
Sierra Tequila maker Borco notes that the domestic European market is one of its most important areas for its business with “great potential in the Caribbean, Asia, Middle East and the Americas”, says Danny Gandert, head of global business development, Borco.
The power of digital
Brands are also harnessing the power of digital to attract consumers in the channel, with social media and virtual reality playing a key role in online strategies. Dron adds: “Online is important to Proximo as e-commerce is at a significant scale.
Markets such as the US, the UK, Germany, Australia and South Africa are all seeing success in e-commerce.”
Jose Cuervo recently revealed the ‘world’s first’ virtual distillery in the 3D virtual world Decentraland. The ‘metadistillery’ allowed consumers to take part in virtual experiences, Tequila education, as well as offering limited edition products and entertainment.
Proximo’s Dron says the firm will incorporate the online world in GTR, with virtual reality “playing an increasingly important role in its activations”.
Gandert also touts the importance of social media, particularly among younger adults.
“We see that short video content, as in social media, is becoming increasingly important to bring brand worlds to life and get the attention of consumers,” says Gandert.
“Therefore, screens will be taking a crucial part in showcasing brands in travel retail. The Sierra Tequila campaign with its bold images and typography has a very clear digital approach, drawing on current social media trends, which are absorbed by Gen Z. Taking this digital approach to the travel retail channel will be a big part of our strategy in the next years.”
Borco’s ‘Lead the Party’ campaign for Sierra Tequila is currently being rolled out in export markets.
The campaign encourages consumers to ‘share their Sierra moments’ on social media and allows them to explore the brand world.
Gandert says: “The campaign is a perfect fit for travel retail because travellers usually have time on their hands. We strongly believe that activation programmes, innovations and customised activities are keys to long-lasting success, and are sure to maintain Sierra as a pioneer in the European market.”
He continues: “They help to create new drinking occasions and address new consumers who are constantly seeking unique experiences while shopping, and want to be entertained.”
Thorsten notes that click-and-collect “has not caught on in GTR, so physical shopping remains paramount”.
He adds that in-store tastings “appear to have morphed from poured tastings to offering takeaway tasting minis, i.e. slightly reducing the opportunity for interaction”.
Borco highlights European cruise ships and border shops as two areas the firm will further explore in the coming years, with “customised brand activities”.
Webb Banks also reports “great success” in the cruise line industry with brands such as Teremana Tequila, Ghost Tequila, Los Arango Tequila, and Corralejo Tequila.
Castellvi says: “We are working with a number of ships that operate Tequila/mezcal-themed bars.”
Stéphane Morizet, GTR marketing director for Brown-Forman, owner of Herradura and El Jimador Tequila, also believes cruise lines offer huge opportunities for GTR.
“Cruise line travel in the Americas shows great promise and is on a pace to return to pre-lockdown passenger capacities much sooner than other regions,” he says. “These positive trends, supported by consumers’ strong desire to cruise again, have prompted several cruise lines to reposition their ships to the US from other global ports. This promises fuller ship passenger manifests and thus a return to duty free sales on the high seas.”
As such, he says the greatest rebound in the cruise industry will continue in the Caribbean. leisure travel Hartmann believes ferries and border stores will be able to capitalise on a shift in leisure travel, particularly in the US and Europe.
He explains: “Holidaymakers may start to move away from hotel stays to self-catering holidays abroad, thus in essence converting their holiday from an on-premise to an off-premise occasion, giving GTR at least an opportunity to partake as an off-premise component. This may be particularly advantageous for channels such as ferries and border stores where a family may max out its duty free allowances, and where a car is available [to transport their purchases].”
The Spirits Business recently explored Irish whiskey in travel retail, as brands demonstrated plans to capitalise on the return of travellers to duty free outlets in the world’s airports.