This podcast series is in collaboration with PATRÓN Tequila, the world’s No. 1 super-premium tequila that is passionately handcrafted in the Highlands of Jalisco, Mexico. To learn more about the PATRÓN, visit PATRÓNTequila.com.
In the final episode of this six-part series, host Zach Geballe speaks with Alex Tomlin, senior vice president for North American marketing at Bacardi. The two discuss why and how tequila has grown in popularity across the globe, what the rise of celebrity tequila means for established brands, and how PATRÓN continues to stand out in the category.
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Zach Geballe: Welcome to “Hablando de Tequila.” I’m your host, Zach Geballe. Throughout this six-part series, we will explore the history, people, culture, and future of tequila. In today’s episode, I’m joined by Alex Tomlin, senior vice president for North American marketing for Bacardi. We discuss how tequila became the most popular spirit in America and why it’s doing the same the world over. Alex, thank you so much for your time.
Alex Tomlin: Good morning, Zach. Great to meet you.
Z: There’s so much to dig into here, I’m almost at a loss of where to start. Let’s maybe begin with this broad question, and then we can narrow in on a few things. What is tequila’s position in the American spirits market right now?
A: It’s got a fantastic position in the market. Personally, I’ve been in the industry for 26 years. I’ve worked in many markets around the world, but over 12 years in the U.S. It really is the golden age of tequila in North America. It’s had a complete transformation as a category from where it was just a couple of decades ago.
Z: Yeah. I definitely want to dig in a little bit to how and why it has undergone that transformation. For listeners who maybe don’t study the data the way that you or I might, what are we talking about in terms of dollar figures or just in terms of relative position? Where does tequila rank in terms of our most purchased and consumed spirits here in the United States?
A: That’s one of the top-performing categories. I think that volumes have grown by almost 200 percent since the early 2000s. I believe that tequila is now the No. 2 spirits category worldwide.
Z: I definitely want to come back to this conversation about the global perception and image of tequila, because I think that’s a fascinating part of the story. But let’s rewind. So you mentioned something on the order of 200 percent growth since the early 2000s. I want to start by saying, there are a lot of possible explanations for that and we’ll get into some of them. But from your position, as a longtime industry insider, what are some of the most important factors that have driven that growth in the category?
A: Over the past 20 years I’ve been working in the industry, as I said, the category has really transformed. I think there are a few reasons for that. The first would be its versatility and the number of occasions that tequila is enjoyed upon now. I mean, it’s had a complete makeover in reputation. It’s evolved from a category that, 20 years ago, was all about spring break and wild parties and slammers, to this category that can be consumed in craft cocktails and those occasions. You have these high-end bottle service occasions at a nightspot, or even in a refreshing-tasting Paloma as a refreshing-tasting drink with your tacos in a Mexican restaurant in any town in America. The versatility and the growth of that have been enormous. The other piece is the premiumization of the category, which is really evident by the huge growth of super- and ultra-premium tequila. It’s easy to look at the category now, Zach, and look at all these numbers and then forget how that was pioneered. When you think about the founders of PATRÓN, it was first hand-sold from bar to bar in the U.S. at the time when golden-colored mixto tequila was reigning supreme. You can imagine, the salespeople had to convince skeptical bar owners and distributors that it was worth paying more for a completely different style of tequila. It’s a 100 percent agave tequila made the traditional way, because of the quality of the liquid. So I think there were more than a few naysayers back then, but the history really speaks for itself. Now when you look at the category and those growth numbers, underneath that growth is just this burgeoning, super- and ultra-premium category. That is almost completely 100 percent agave. And to be honest, PATRÓN was a trailblazer and always wrote the playbook for that whole category evolution. The third big thing that I would say is that consumers these days are really looking for transparent products and really trying to understand what they’re putting in their bodies or what they’re putting in their cocktails. So there’s an increasing interest in how products are made. PATRÓN, as a trailblazer of this super-premium segment, has always been made the same way. There’s no compromises, there are no cutting corners, and it’s just made with three simple ingredients: water, agave, and yeast. There’s real simplicity in that, and I think that’s what consumers are looking for today.
Z: That absolutely seems to be the case from where I sit. I want to dive into this conversation a little bit about production. We’ve already covered this in previous episodes, but I think there’s a fascinating look at it from the larger lens that you can offer. But before we get there, I just want to ask a follow-up question. When we talk about growth in the category, you mentioned growth in the ultra- and super-premium expressions. Are we seeing roughly equivalent growth in all tequila categories, whether it’s different age expressions or different price points? Or is the growth more concentrated in certain specific segments of the broader tequila industry?
A: What we’re seeing across all spirits categories is premiumization, or consumers trading up. And that’s more accelerated. Tequila is a very popular high-grade category. Yeah, we’re seeing acceleration across price points. Obviously, with PATRÓN, we have a number of different expressions, all of which are growing faster than we have seen in recent memory. That cuts across the silver expression, reposado, and higher marks.
Z: I guess now is as good a time as any to get into this question that I have. We’ve learned a lot in the process of these conversations about the methodology behind making PATRÓN Tequila, how closely it hews to their traditional methods, and how uncompromising it is. But there’s undoubtedly some challenges in both adhering to those very noble principles, dealing with a burgeoning category, and meeting demand without compromising production quality. You can go into as much or as little detail as you care to. But is there tension within the broader company? Because I would imagine there are some people who would love to have two, three, or four times as much tequila to sell. Or whatever the number is, that’s greater than the current volume. But obviously, to maintain that standard, that’s not really an option, at least not swiftly.
A: Yeah, I think it’s a great question. Undoubtedly, with the explosive growth in the category, there’s a lot of tension through our supply chain. At the heart of it is an unwavering dedication to quality and to not cut corners. Some of the decisions that we have had to make are difficult. If you looked at it from a financial perspective, you’d probably say that’s a little bit unusual. For example, as we’ve expanded PATRÓN’s production to cope with increasing demand, we have made the decision to almost make a carbon copy of the original distillery times eight. So we’re making the tequila exactly the same way. We’re not looking at consolidation or any industrial processes. This is a dedication to this tequila being envisaged a certain way, having a real simplicity and traditional method into the creation, and replicating that. So just as an example, at PATRÓN, the agave is slowly roasted in brick ovens. We have 542, believe it or not, small wooden fermenters. We have 140 small copper pot stills. And before the agave even goes into the oven, we crush the agave with a very traditional method, which is the volcanic tahona mill. We have, believe it or not, 14 of those mills. There’s this real dedication to actually putting cost into the process. But we know that it takes time and we know that the tequila needs to be made the right way, and we don’t take any shortcuts. So that does put tension into the business; we’re currently selling everything that we make. But we know that our product is everything and it’s really important that we honor that tradition and the original vision of the brand.
Z: That’s been very evident to me in these conversations. How seemingly throughout the company, throughout the production process, that idea of remaining true to the initial vision is very potent. And that’s a very cool thing. Because, as someone rather far removed from Jalisco, you want to trust these things. But at the same time, it’s hard as an individual consumer to know that that really remains central to the production and to the brand’s identity. I want to go back a minute in our conversation to talk a little bit about the way that tequila, and different expressions of PATRÓN in particular, have reached the craft cocktail industry and become such a critical component to it. Let’s start with this question as best you can answer it, Alex. Was the resistance to tequila in craft cocktails, maybe in the earliest days, about the lack of quality in the category? Or was there anything else going on?
A: It’s a great question. I’ll do my best to answer it.
Z: You can’t possibly know what was going on in the mind of every suspender-wearing bartender in 2003.
A: Exactly. The craft spirit renaissance seems to have been going on for a long time now. For as long as I can remember, tequila has really been the darling of bartenders. And the consumers looked to be a little bit more sophisticated in their choices and branch out a little bit more. Obviously, tequila as a category is rich with storytelling. It has real complexity and breadth across the blanco and silver expressions, all the way through to the reposados and the añejos that can be really nice complements to sophisticated cocktails on the menu made with agave spirits or just used to switch out old favorites like whiskey in an Old Fashioned, for example. There’s been this huge experimentation in this category that bartenders love. Before that, maybe it wasn’t taken as seriously. Maybe it was written off as a category that was just for entry-level drinkers, for shots and slammers. But something definitely changed, probably in the last 15 years.
Z: Just from a marketing perspective, you see consumers and bartenders changing their relationship to tequila and looking at it not as you mentioned, as I first encountered as a college student, as this thing you do shots of or something that is very fun, but maybe not very serious, into a category with a lot of nuance and complexity and different expressions and all that. How much have you, or broadly PATRÓN or Bacardi, had to change up the marketing approach? I don’t know if this was something PATRÓN particularly ever did, but certainly other tequila companies did. Do you even want your bottles appearing at spring break or stuff like that? Or are you looking to position them differently? I don’t know. That’s a little bit of a muddled question. I apologize, but hopefully, you understand.
A: My perspective on this is that it’s a really big category now. Tequila straddles a whole variety of occasions — from the shots occasion, which is still very important, all the way through to these upper-end and maybe lower-energy type of occasions that I was talking about earlier on. There are different styles that suit those occasions. Over the last 10 to 15 years within tequila, in particular, we’ve seen an acceleration of the browner-colored varietals like the reposado, añejo, barrel-aged versions. Because that’s where consumers are going and where cocktails are going. Clearly, within our marketing programs and activity, we’re really focused on not only growing our silver tequila base but also accelerating the growth of our reposado and añejo tequilas at a terrific level. To give you an example, we’ve got almost 11,000 barrels aging in our warehouse facilities in Jalisco, all with different oak — whether it be French oak or American oak or other types of oak — all of which we can use to create really unique and differentiated blends as the category develops.
Z: That’s a really interesting point and nicely leads me into another part of this that I wanted to discuss. When you look at people who are enjoying these more aged or ultra-premium expressions of tequila or of PATRÓN, specifically, is it predominantly people who are already very much committed to tequila as a category and are just exploring these more aged expressions? Or are you finding that it’s people crossing over from whiskey in particular?
A: All of the above. The category is growing by bringing in more and more people. So we’re definitely recruiting loads of new people into the category. And that is coming through those silver tequila occasions and drinks like a Paloma or the Margarita, which has been the No. 1 cocktail in America for the last 10 to 15 years, at least. But also, consumers are getting more experimental and switching over from other categories. For example, you could be in a bar in Manhattan. Let’s say your regular drink is a whiskey Old Fashioned. Then you pick up the menu and you may see, “Oh, this is interesting,” and it’s an Oaxaca Old Fashioned, which is essentially a riff on the classic whiskey Old Fashioned. So it’s reposado tequila, lightly aged to mimic some of those notes that are found in whiskey, with the backdrop of mezcal, bitters, and agave nectar. It’s just a riff on one of your regular everyday drinks with a little bit more interest, with different flavor notes and different attributes. This is happening across cocktails, so you’ve got consumers from other categories switching it up a little bit. And then you’ve got consumers coming in at the very top end of the category for the first time on different drinking occasions. As I said, it’s a little bit of everything. This is sometimes how big categories grow.
Z: Yeah, absolutely. It occurs to me now, in thinking about what you all are doing with some of these many barrels that are aging in Jalisco. A challenge that I’ve heard in speaking to bourbon, Scotch, and other whiskey producers, is trying to look into the future in a way that might not be true with silver tequila or even a reposado or potentially añejo. But when you’re barrel-aging any spirit for three, five, 10, however many years, you really have to be anticipating where the market might move and what people want flavor profile-wise and statement-wise. Is that a big subject of conversation in this planning?
A: Yeah, absolutely. As with any aged spirit category, long-term supply, planning, and forecasting is critical. At PATRÓN, it’s about making sure we do everything the right way. Clearly, the huge upswing in demand puts a lot of pressure on the supply chain. We have always worked to make sure that we’re putting liquids into our bottles that have been made the right way, and that are aged the right way. We don’t take any shortcuts. I can’t speak for everybody on the market, but there are different ways of accelerating that process; potentially taking shortcuts in order to make huge fluctuations in demand. But that’s just something that we wouldn’t do.
Z: Now let’s address the 800-pound elephant in the room, or at least an elephant in the room. And that’s one other thing that we’ve seen in the category of late, which is this explosion in celebrity tequilas. I’m sure you can’t know what’s going on inside all of these brands and inside all these famous peoples’ brains. But in your eyes, Alex, why is this category, in particular, one where we’ve seen so much of these celebrity brands more than in any other spirits category?
A: I just think it’s got huge appeal, right? If you’re at any Hollywood party or Manhattan party, tequila is one of the key drinks being served. So it’s part of the repertoire. From a crude business perspective, people gravitate towards growth and where money is being made. There’s a sweet intersection between a category that I love as part of my repertoire, the romance around how tequila is made, the whole Mexican heritage story, and the ability to make money. The critical thing for us at PATRÓN is that we welcome competition. We wrote the playbook for this category, and we’re always doing things the right way. As I said, the original founders tried very hard and went to painstaking lengths to make sure that our product has always been made the right way and in a traditional process. We talked earlier about some of those aspects of that process and some of the equipment and tools and the ovens that we have in order to guarantee that quality time and time again. I think where it’s progressing is more made-to-order type of brands. I don’t know, Zach, you might open your Instagram feed to any celebrity and then all of a sudden, they’re standing there in L.A. or New York, and they’ve got a table full of flutes of different colors and expressions of tequila and have some comments around how they’re tasting and choosing. Essentially, these are liquids designed by a client. They’re not designed by the craftsmen, and they’re often purchased from distilleries making many different brands. I think it’s really important for us to say that at PATRÓN, we only make PATRÓN. This means that we have complete control, visibility, and transparency ourselves, over the production process. Quality is paramount in terms of what we do. We only use all-natural ingredients because it’s important that we don’t cut any corners. But if I were an entrepreneur starting a brand and I’m really wanting to get down to market really quickly, it’s possible that there may be a temptation to cut corners. These days, you can actually apply a variety of techniques to deliver a different taste profile to your tequila. Legally, there are additives you can put into tequila to change the color, appearance, and the mouthfeel. This isn’t always shared with consumers. But you can often tell if something’s been added to the tequila when you uncork it or take the cap off, and you smell that vanilla bomb on the nose. That’s often a sign that vanilla extract is being added to the tequila. At PATRÓN, we don’t add anything; it’s 100 percent natural.
Z: If it’s all right with you, Alex, this actually prompted a question that I hadn’t considered before we started talking. Another thing that we’ve seen in the tequila category, and maybe some of it more on the insidious line that you were describing and some of it is maybe a little bit more well intentioned, is the rise of flavored tequilas within the flavored spirits category. As far as I’m aware, that’s not something that PATRÓN does at the moment. Would that cut too much against the established brand identity, or is that something that might be on the table in the future?
A: I mean, we’re always open to pushing the boundaries of the category, experimenting, and moving the craft onwards. The real truth of the matter is that we need to use all of our agaves to deliver our core expressions of tequilas. Such is the demand in the market right now. We’re racing to ensure that our consumers, who are after our main line of products, are satisfied. Once our demand and supply even out, of course, there will be opportunities to explore the categories that will develop. It’s a big category now, and I’m sure it will develop in many different ways in the future.
Z: OK, I just have a couple more final questions for you, Alex, as we wrap things up. When we talk again about marketing PATRÓN and its brand presence, I’ll say this. When I was first getting into drinking and getting into drinking tequila, PATRÓN was, even at that time, one of the gold standards within the tequila industry. And I think it certainly maintains that position. That said, there could be a challenge of people being like, “This isn’t new.” Spirits, in particular as a category, fetishizes history and also sometimes is obsessed with shiny new objects, whatever that might be. How do you maintain awareness of the brand and keep it front of mind for people, without relying on tricks?
A: As I said, we’re growing faster than we have ever grown before, which is fantastic from a brand position. That means that our biggest challenge is keeping up with the demand. We just spoke about that. But it’s true that in the early years, a lot of PATRÓN’s success was driven by its differentiation and its appeal, this luxury product that transformed a category and was known for its marketing. In some respects, it made this meticulous craft story that we’ve been talking about one of the best-kept secrets. There’s not a lot of people who would actually know the story that we’ve been discussing, and that’s a story that’s never been told before. But now, consumers have changed. They’re more involved with the category. Bartenders are hugely involved with the category. And people are now really interested in the story behind the PATRÓN: the people, the fact that 60 hands make every bottle, the story behind the brand, and the legacy and heritage of this incredible spirit. So that’s the story we’re beginning to tell.
Z: Yeah, that notion of grounding the product where it’s from and with the people who make it is another thing that we have certainly seen of late in beverage alcohol more broadly that’s of real importance to a lot of consumers. Alex, thank you so much. It’s been really fascinating. It’s so cool to hear about the central piece of what I’ve always been interested in. That is, amidst this vastly and rapidly growing category, this commitment to traditional methods and quality remains. I appreciate that in some ways, it’s easy to say, “Well, we just wouldn’t compromise on that.” But it’s not easy. In some cases, certainly, we have seen other examples in other categories where, one way or another, quality has to suffer to meet demand. So it’s been a pleasure to hear that from your perspective and just get more insight into the growth of the category. So again, thank you so much. It was really a fascinating conversation.
A: I appreciate the time. Good talking to you.