Mike Dolan: ‘No limit’ to luxury spirits pricing
The co-founder of Mijenta Tequila believes that the more premium a spirit brand, the faster it will grow, with consumers willing to pay “super-high” prices.
Mijenta Tequila was co-founded by former Bacardi CEO Dolan, Juan Coroado and Elise Som in 2020.
Mijenta received B Corp certification in August 2022, and is the first Tequila brand to achieve this status.
Dolan has laid out the spirits trends for this year, focusing largely on premiumisation.
“We’ve heard for years how the luxury category is absolutely on fire, but that’s a total understatement. In spirits, the fact is that the more premium it is, the faster the growth,” he said.
Premium spirits brands have “completely de-coupled from ordinary consumer products”, Dolan continued, adding that consumers are eagerly paying for “super-high” prices.
“The classical rules of economics just don’t apply here.”
A key driver of this trend is “scarcity”, said Dolan, with brands doubling down on special editions and limited drops, building a “consumer cult”.
“The exclusivity creates a mystique that has people paying crazy multiples of what the entry-level expression in a brand’s portfolio might cost,” he added.
“The lesson is that, if positioned properly, there’s no upper limit to retail price for luxury products. This year, we’re going to see even more brands lean into this trend.”
In August 2022, Ivan Menezes, the CEO of Diageo, said that he has confidence the firm’s growth in the affordable luxury sector will continue through an upcoming recession, with Diageo’s premium-plus brands contributing 57% of reported net sales in its 2022 fiscal report.
Diageo recently credited its 9.3% net sales growth for the first half of fiscal 2023 to a ‘diversified footprint’, its advantaged portfolio, and the premiumisation trend.
In January, IWSR Drinks Market Analysis reported that premium price tiers were responsible for growth across all major alcohol categories in the US in 2022.
Dolan said: “Regardless of what happens with the economy more broadly in 2023, consumer appetites for luxury spirits has resilience. They’re not going to compromise here – if necessary, they’ll find other places to cut back, but not on high-end spirits that have social cache.”
Brands need a story
Dolan also expressed the importance of brands having a story: “Brands that have story value are thriving.”
“Ones that don’t are struggling, and all they have to compete on is price,” he continued. “And they’re discounting their way out of existence, or at least out of relevance.
“Consumers are hyper-focused on authenticity, traceability and transparency, [they] want to understand what’s behind the brands they’re supporting. And brands that reward their interest with a great narrative are taking off.
“I’d also say that in the spirits industry, there seems to be a new brand every day with some celebrity affiliation – and that’s really a way to fake story value. But ultimately there’s no depth to the brand, and if the product’s no good, there’s no reason for someone to drink it twice.”
A number of celebrities have moved into spirits in the past couple of years, especially in the Tequila category.
E-commerce platform Drizly recently unveiled the best-selling celebrity-backed spirits, with George Clooney’s Casamigos coming out on top.
“This year, we’re going to see separation between strong, dynamic and interesting brands – and those that don’t have a story,” Dolan said. “If a brand itself doesn’t know why it exists, consumers aren’t going to keep them afloat.”
Advantage for smaller brands
Finally, Dolan said there may be a bright future for smaller and more independent brands, as they have the ability to demonstrate social commitment.
“Whether it’s sustainability, giving back to local communities or treating employees fairly, consumers support those who have strong values and ultimately demonstrate greater brand loyalty,” he explained.
“The trouble here for big, legacy spirits companies is that it’s impossible to backfill this part of their story in an authentic way. This gives smaller companies an edge, and one that I think we’ll see emphasised even more strongly this year.
Last year, The Spirits Business sat down with the Mijenta Tequila CEO, and discussed the brand’s B Corp certification.