Bacardi goes all in on tequila

In a deal worth an eye-watering $5.1 billion, spirits giant Bacardi has swallowed ultra-premium tequila brand Patrón. However, with tequila consumption dwarfed by that of vodka or gin for example, the question here is why. The answer, which may surprise you, is gin.

The success story in spirits for the 2010s has unarguably been gin. Mother’s ruin has gone from a somewhat niche category dominated by a handful of huge brands, to a hipster-embraced megatrend. However, growth at the rate gin has seen can only continue for so long, and with the category set to see UK value growth decelerate over the next five years, the big players in spirits are unsurprisingly looking for the next big thing.

With gin’s meteoric growth slowing, the eyes of the big players have fallen on two aspiring categories in recent years; tequila and rum. Whilst there are certainly opportunities in rum to capitalise on, it’s still fairly recently that we saw the spiced rum craze envelop the category, and with tequila growth eclipsing that of rum, it seems consumers are not quite ready to revisit the category quite yet.

This has left tequila as the standout opportunity spirit, with a growth rate comparable to that of gin in the early 2010s. As such, big players are scrambling to get on board with the trendy category, and Bacardi’s move into the upper echelon of tequila was actually predated by Diageo’s $1bn purchase of George Clooney’s Casamigos brand.

There is nothing surprising in big players looking to get ahead of the trend; however, it is the scale of Bacardi’s gambit here which will undoubtedly have a few eyebrows raised in the industry. While Patrón is relatively well known as a brand, a household name it is not. The ultra-premium tequila brand is arguably best known outside of Mexico for its popular liqueur range than for its tequilas. However, to see this as a negative point is to miss the point of Bacardi’s aim. Bacardi is playing the long game and will leverage brand recognition ruthlessly as it aims to be the top dog of tequila.

Related links

https://www.globaldata.com/store/report/cs0049rr–opportunities-in-the-north-american-spirits-sector-analysis-of-opportunities-offered-by-countries-in-the-region/