World Spirits Report 2023: Tequila & mezcal

Agave spirits are in vogue, and Tequila, in particular, is showing little signs of going out of fashion.

At the start of the year, IWSR Drinks Market Analysis revealed Tequila had overtaken American whiskey to become the second-biggest-selling spirit category by value in the US. At the time, it was expected that Tequila would overtake vodka by the end of 2023.

While this is yet to be confirmed, it’s worth noting that Tequila’s net sales value overtook vodka in Diageo’s fiscal 2023 results. During the company’s Capital Markets Day in November, Alvaro Cardenas, the group’s president of Latin America and Caribbean, noted the Tequila category overall has been growing three times faster than international spirits (excluding baijiu) over the past five years. Tequila rose at a compound annual growth rate (CAGR) of 18%, while international spirits rose by 5%, according to IWSR.

Cardenas noted that Tequila penetration in Europe is “relatively low”, but believes Southern Europe is a region where Tequila can “be positioned to compete”, given the region’s penchant for aperitivos.

Mezcal has been receiving increased attention – but its sales are still small, despite excitement about the category. “The mezcal category is still relatively underdeveloped, apart from in Mexico and some US states, and therefore is still a predominantly on-premise category, with consumers exploring mezcal in bars mainly through bartender recommendations,” explains Sheyan Patel, chief commercial officer at The Lost Explorer Mezcal. “But that means there is a huge potential in the chain retail and top-end grocery channel, as the agave category continues to grow in terms of volume and range of brands available.

“We will be looking to expand our chain retail presence in the US [in 2024] while also breaking through into the grocery channel in the UK with our new 200ml SKU.”

The US has been a very strong market for The Lost Explorer this year. “We are on track to double our 2022 volume, as we continue to develop and grow our distributor relationships,” Patel adds.

The expression is a handcrafted spirit that is made in Oaxaca, Mexico.

Overall, Patel described 2023 for mezcal as a “year of consolidated growth”.

According to Euromonitor International data, the combined Tequila and mezcal ­category is set to grow from 47.2 million cases in 2022 to 50.8m in 2023. This is expected to increase further to 53.4m by the end of 2024.

In value terms, combined Tequila and mezcal sales reached US$24.5bn, and are expected to hit US$26.6bn in 2023, and US$27.97bn in 2024.

Click here to read our World Spirits Report for the rum category.

Brands to watch in 2024

Sierra Tequila

It has been a busy year for Sierra Tequila. The brand moved into the low-alcohol space in the middle of the year with the launch of Sierra Tropical Chilli (18% ABV). A month later, news broke that Stock Spirits had agreed to acquire Sierra Tequila’s parent company, Borco. The company described Stock Spirits as a “strong strategic investor”, that would help drive the global expansion of Borco’s brands – including Sierra Tequila.

Ilegal Mezcal

Founded by John Rexer in 2006, Ilegal Mezcal joined the Bacardi portfolio of brands in September. Bacardi has owned a minority share in the mezcal brand since February 2017. At the time of purchase, Bacardi cited IWSR Drinks Market Analysis data, which predicted the super-premium-plus mezcal category would grow at a compound annual growth rate of 16% over the next five years. With Bacardi’s muscle now behind it, could Ilegal Mezcal be set for major expansion?

1800 Tequila

In 2022, 1800 Tequila was the fastest-growing spirit in the world after it more than doubled in value. In those 12 months, 1800 Tequila saw its brand value increase by 111.5% to US$424 million, according to the Brand Finance Spirits 50 report. With the total Tequila category forecast to continue its upward trajectory, can 1800 Tequila continue its strong growth momentum?