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October 13, 2011

Liquid Living Magazine


Contact: Bill Caldwell, Office of Public Information, Pace University, 212-346-1597, wcaldwell@pace.edu


New study by Pace University professor shows US is largest tequila market, predicts tequila will continue as fastest growing distilled spirit category in the world.

Trend is spurred by Americanization of the tequila industry as seen this week by major purchase of Herradura by Brown-Forman and, earlier, of Sauza by Fortune Brands.

“A growing cocktail culture around the world” and a move upscale to 100% agave tequilas that rival single-malt scotches and cognacs in prices and complex tastes.

New York, NY, August 31, 2006 – “The Global Tequila Market,” a new study by a marketing professor at Pace University’s Lubin School of Business, the corporate strategy expert Marc N. Scheinman, and published by Beverage Marketing Corporation, New York, is the most comprehensive work done on the globalization of tequila. The 104-page report reinforces its globalization theme with key financial statements and the observations of top management in the tequila industry.

The report focuses on the strategic alliances that have developed among the world’s leading distilled spirits companies and top Mexican tequila producers (Diageo-Jose Cuervo, Fortune Brands-Sauza/El Tesoro and Pernod Ricard-Tezon/Viuda de Romero). It also predicts and explains the logic behind this week’s aggressive $876mn purchase by US-owned Brown-Forman of Herradura, producer of Mexico ’s leading brand (El Jimador) and 2nd most popular super-premium tequila (Herradura).

The study traces tequila consumption patterns in the USA , Mexico and globally from 1995 to 2005 and offers a global forecast through 2010.

There’s a “growing cocktail culture around the world that goes way behind margaritas to charro negros -- tequila with Coca-Cola -- and drinks like the Paloma and the Cantarito, made with mixtures of grapefruit and other citrus juices,” Scheinman says. Other points:

· Tequila will continue being the fastest growing distilled spirit category in the world, thanks in part to a huge and growing Mexican population, particularly in California, Texas, Florida, Illinois and New York, which account for almost half of U.S. tequila sales; But sales are growing outside the Mexican population as the influence of Hispanic culture in the U.S. becomes more pervasive;

· The trend is not just American, occurring also in Europe and Japan;

· The USA (currently nearly a $4 bn market at retail) will remain the focal point of global tequila growth, particularly in the high-end super-premium 100% agave category, emerging as akin to single malt scotches and fine cognacs, that sells for $30 and more per 750ml bottle and is linked to “trends to connoisseurship in a growing gourmet culture”;

· Diageo and Jose Cuervo will lead growth through new product introductions (flavored tequilas). “These partnerships will do for tequila what Cuervo-Diageo have done with vodka and what Brown-Forman has done with Jack Daniels,” says Scheinman;

· Patron Spirits, a relatively new player, will surpass Sauza as the Number 2 tequila brand in the USA by 2010;

· In tourism, now that UNESCO has recognized the tequila area, particularly in the state of Jalisco, as world protected site (at the end of July), visits to the area will grow.

“The outlook for tequila remains bright, particularly in the USA , through 2010,” says Scheinman, who speaks fluent Spanish, spends six months a year in Mexico , travels in Brazil , Chile and Argentina , and has just returned from one of his frequent trips interviewing Mexican CEOs.

“Until then, growth will average nearly 8% per year in volume and 10% in value terms. The trend that favors super and ultra-premium brands will accelerate further and competition will increase.” “By sharp contrast, Mexican unit sales are likely to grow at an average rate of only 2%, but sales in value terms will increase by 4%,” he says. “The USA and Mexico will continue to account for almost 90% of tequila’s global sales, just as they have since 1995.”

2005-2010 Global Market Forecast by Pace University Professor Marc N. Scheinman:

“In 2000, in the midst of the last great blue agave shortage, the USA became the world’s largest tequila market, a position it has maintained ever since and will hold throughout the forecast timeframe. Between 2005 and 2010 US sales will increase at the compound average yearly growth rate (CAGR) of 7.8%, from 9.23 to 13.56m nine-liter cases. By 2010, the USA will represent 54.1% of global tequila sales, a gain of 4.8 points over 2005 figures.

“By contrast, Mexico , the world’s second largest market, will grow only one-quarter as fast. Its 2.1% CAGR will increase case sales from 7.35m in 2005 to 8.33m in 2010, but its share of global volume will decrease to 33.2% in 2010, down a full six points from 2005.
“However, growth in the rest of the world (ROW), particularly in Europe and Japan will be much faster than in Mexico . Its 7.0% CAGR will lift sales, from 2.16m cases in 2005 to 3.13m in 2010. As a result, ROW share will increase to 12.5% in 2010, up from 11.5% in 2005.

“Clearly then, the USA and ROW will continue being tequila’s global growth engines. Aggregate global consumption will soar by 6.7% annually (CAGR), from 18.75 to 25.02m in the forecast period.”

Professor Scheinman is available to comment on the study. Phone (732) 828-6524, email scheinman@att.net

Web sites: Beverage Marketing Corporation http://www.beveragemarketing.com

Pace University http://www.pace.edu