Beverages: Tequila on the Rise: Can Vodka Hold Its On-Premise Crown?

Why it is the topic trending:

• Shifting Consumer Preferences:

  • Vodka, while versatile and a staple in many cocktails, is facing increasing competition as consumer tastes evolve. The article notes that tequila is becoming mainstream, indicating a broader shift in preference towards agave-based spirits.

• Tequila's Mainstream Appeal:

  • Tequila, once perhaps considered a more niche spirit, has now achieved widespread popularity, evident in its equal volume share with vodka in the on-premise market. This surge in demand makes the battle for the top spot a significant talking point in the beverage industry.

• Data-Driven Insights:

  • The analysis by CGA by NIQ provides concrete data and statistics on the sales volume of different spirits in bars and restaurants. The fact that tequila is now neck and neck with vodka, and showing an upward trend while vodka is declining, makes this a data-backed and therefore credible trending topic.

• Economic Implications:

  • The spirits industry is a substantial part of the economy. Shifts in market share between major categories like vodka and tequila have significant implications for producers, distributors, and on-premise establishments, making it a topic of interest for businesses and industry professionals.

• Regional Variations:

  • The article highlights the diverse landscape across different US states, where either vodka, tequila, or whiskey may lead in volume. This regional variation adds another layer of complexity and interest to the national trend.

Overview:

The article discusses the current state of the on-premise (bars and restaurants) spirits market in the United States, focusing on the long-standing dominance of vodka in terms of volume sales. It highlights a significant development: tequila has now caught up with vodka, sharing the top spot in volume at 23.5% each. The data indicates a potential shift, as vodka volumes are down year-to-date, while tequila continues to grow. The article also delves into regional variations across states and examines the performance of vodka across different price tiers, noting a slight premiumization trend. Finally, it emphasizes the importance of vodka in popular cocktails like the Espresso Martini, suggesting ongoing opportunities for the category despite the rising competition.

Detailed Findings:

• Vodka's Reign Threatened: Vodka, historically the leader in volume sales since 2016 when CGA by NIQ started tracking, is now facing serious competition from tequila.

• Tequila Equals Vodka in Volume: Both vodka and tequila currently hold a 23.5% share of the total spirit sales volume in the U.S. on-premise market.

• Tequila's Upward Trajectory: Year-to-date, vodka volume has decreased by 3.6%, while tequila volume has increased by 0.6%, suggesting tequila may soon surpass vodka.

• Regional Leadership:

  • Vodka still leads in volume in Arizona, Florida, Illinois, Nevada, and Pennsylvania.

  • Tequila has taken the lead in California, Colorado, Georgia, Louisiana, New Mexico, New York, and Texas.

  • Whiskey holds the top volume position in North Carolina, Ohio, Oregon, Tennessee, and Washington.

• Vodka Premiumization: While the overall vodka category is declining in volume, the ultra-premium segment shows an 8% year-on-year growth, indicating some consumers are trading up. Value, Mid, Premium, and Super Premium tiers are all experiencing sales declines.

• Vodka in Cocktails: Both flavored and unflavored vodka are among the top four cocktail bases for consumers. Vodka-based cocktails are prominent in the top 10 sales, with the Espresso Martini being a notable success, ranking as the number two cocktail (after the Margarita).

Key success factors of product (trend):

• Tequila's Versatility and Evolving Perception: Tequila has shed its previous image as solely a shot or Margarita ingredient and is now embraced for its versatility in various cocktails, appealing to a wider range of palates and occasions. Its perceived authenticity and connection to specific regions and production methods may also contribute to its appeal.

• Vodka's Established Presence and Adaptability: Vodka's long-standing popularity is built on its neutral flavor profile, making it a versatile base for countless mixed drinks. The emergence of flavored vodkas and its crucial role in popular cocktails like the Espresso Martini demonstrate its ability to adapt to changing consumer tastes.

• Premiumization in Spirits: The growth in the ultra-premium vodka segment indicates a broader trend of consumers willing to spend more for higher-quality spirits, regardless of the base. This suggests that focusing on quality and unique offerings can still drive success for both vodka and tequila brands.

• Cocktail Culture: The thriving cocktail culture in the on-premise channel significantly influences spirit popularity. The success of cocktails like the Margarita and Espresso Martini, both featuring tequila and vodka respectively, highlights the importance of these drinks in driving volume.

Key Takeaway:

While vodka remains a dominant force in the on-premise spirits market, its position as the top volume seller is increasingly challenged by the rapid growth of tequila. Regional preferences and trends in premiumization and cocktail consumption further complicate the landscape, indicating a dynamic and evolving market.

Main Trend:

The main trend is the increasing competition and potential shift in dominance between vodka and tequila in the US on-premise spirits market, with tequila rapidly gaining ground and potentially poised to overtake vodka in volume sales.

Description of the trend (please name it):

The Tequila Takeover (On-Premise Edition): This trend describes the significant surge in popularity of tequila within bars and restaurants, leading it to reach parity with vodka, the historical volume leader. The trend signifies a potential long-term shift in consumer preferences for on-premise spirit consumption.

What is consumer motivation:

• Seeking Variety and New Experiences: Consumers in the on-premise channel are often looking to explore different tastes and experiences beyond their usual choices. Tequila's rise suggests a desire for a broader range of flavor profiles and cocktail options.

• Perceived Sophistication and Trendiness: Tequila has gained a certain level of cachet and is often associated with a more sophisticated or trendy drinking experience, especially in certain cocktail formats.

• Flavor Preference: The unique flavor profile of tequila, derived from the agave plant, appeals to a growing number of consumers who may find it more distinctive or enjoyable than the relatively neutral taste of vodka.

• Following Social Trends: The increasing popularity of tequila cocktails on social media and in popular culture likely influences consumer choices when they are out at bars and restaurants.

What is driving trend:

• Evolving Cocktail Culture: The development of innovative and appealing tequila-based cocktails beyond the traditional Margarita has significantly broadened tequila's appeal and usability in the on-premise market.

• Increased Availability and Brand Investment: A greater variety of tequila brands, including premium and ultra-premium options, are now available in the market, supported by increased marketing and promotional efforts.

• Changing Demographics: Shifts in the demographics of on-premise consumers and their preferences may be contributing to tequila's growth, potentially reflecting the drinking habits of younger generations.

• Cultural Influences: The growing appreciation for Mexican culture and cuisine in the US may also be contributing to the increased popularity of tequila.

What is motivation beyond the trend:

• Quality and Craftsmanship: Consumers are increasingly interested in the origin and production methods of their drinks, and tequila's connection to specific regions and traditional processes may hold appeal. This aligns with a broader trend towards valuing authenticity and craftsmanship.

• Versatility in Different Occasions: Both vodka and tequila cater to a wide range of social occasions, from casual drinks to more celebratory events. The motivation beyond the specific trend might be the desire for versatile spirits that fit different moods and settings.

• Personalized Experiences: Consumers often seek out drinks that reflect their individual tastes and preferences. The availability of a wider range of spirits allows for more personalized and tailored drink experiences.

Description of consumers article is referring to:

The article primarily refers to on-premise consumers in the United States. These are individuals who purchase and consume alcoholic beverages at bars, restaurants, and other similar establishments.

• Likely Product Preferences: They are interested in a variety of alcoholic beverages, including spirits, and are influenced by factors like versatility in cocktails, flavor profiles, trends in the market, and potentially price and perceived quality. They likely enjoy popular cocktails and are open to trying new or trending drinks.

• Age: The article mentions trends in premiumization and the rise of the Espresso Martini, which suggests the consumers likely span across different age groups, including Millennials and potentially Gen Z who are of legal drinking age and engaging with cocktail culture.

• Gender: While not explicitly stated, spirit consumption in on-premise locations is generally enjoyed by both men and women.

• Income: The mention of ultra-premium vodka sales growth suggests a segment of these consumers has a higher disposable income and is willing to spend more on premium experiences. However, the overall market also includes consumers across various income levels.

• Lifestyle: Their lifestyle likely involves socializing at bars and restaurants, where they consume alcoholic beverages as part of their leisure and social activities. They might be influenced by current trends and recommendations from bartenders or peers.

• Category Shopping Preferences: They are frequent category shoppers as they are regularly purchasing spirits at on-premise locations. Their shopping preferences are driven by the menu offerings, bartender recommendations, and their own past experiences and preferences.

• General Shopping Preferences: Beyond the specific category, these consumers likely value convenience (ordering at a bar), experience, and the social aspect of on-premise consumption.

Conclusions:

The data clearly indicates a significant shift in the on-premise spirits market, with tequila emerging as a strong contender to vodka's long-held volume leadership. While vodka remains a crucial category, its declining volume and tequila's continued growth suggest a potential changing of the guard. Regional variations highlight the diverse preferences across the US, and the slight growth in ultra-premium vodka indicates that there are still opportunities for vodka brands, especially in higher-priced segments and through popular cocktails. Ultimately, the on-premise spirits landscape is becoming more competitive, with consumer preferences playing a key role in shaping the future.

Implications for brands:

• Vodka Brands: Need to innovate and focus on premiumization, potentially highlighting unique attributes or flavors to retain market share. Emphasizing their role in popular and emerging cocktails like the Espresso Martini is also crucial.

• Tequila Brands: Should capitalize on their growing popularity by ensuring wide availability in on-premise locations and continuing to promote their versatility in cocktails beyond traditional Margaritas.

• Whiskey Brands: Need to maintain their strong regional presence and potentially explore opportunities to expand their reach in other markets, possibly through new product offerings or cocktail strategies.

• All Spirit Brands: Must closely monitor regional trends to tailor their marketing and distribution strategies accordingly. Investing in understanding consumer preferences and the drivers behind cocktail trends is essential for staying competitive in the dynamic on-premise market.

Implication for society:

• The shift in spirit popularity could reflect evolving cultural tastes and preferences in beverages. It might also indicate a greater interest in diverse and flavorful options beyond traditional staples. The rise of tequila, in particular, could be linked to a broader appreciation for Latin American culture.

Implications for consumers:

• Consumers can expect a wider variety of tequila-based cocktails and offerings in bars and restaurants. This increased competition between spirit categories could also lead to more innovation and potentially better value in the long run. They might also see more premium vodka options as brands focus on higher-end segments.

Implication for Future:

• The future of the on-premise spirits market will likely see continued competition between vodka and tequila, with the potential for tequila to become the volume leader nationally. Regional preferences will remain important, and other categories like whiskey will also maintain significant market share. Innovation in product offerings, particularly in flavored variants and ready-to-drink cocktails, will likely continue to drive growth and influence consumer choices.

Consumer Trend (name, detailed description):

The Agave Ascendancy: This trend describes the increasing preference among on-premise consumers for agave-based spirits, primarily tequila, leading to a significant gain in market share and a challenge to vodka's historical dominance. This trend is characterized by a growing appreciation for tequila's flavor profile, versatility in cocktails, and perceived trendiness.

Consumer Sub Trend (name, detailed description):

Premium Pour Preferences (within Vodka): While overall vodka volume is declining, there's a noticeable increase in the ultra-premium segment. This sub-trend indicates that a segment of vodka consumers is willing to trade up for higher-quality, more expensive options, suggesting a focus on experience and perceived value over sheer volume.

Big Social Trend (name, detailed description):

Flavor Exploration and Experimentation: This broader social trend reflects consumers' increasing desire to explore diverse and complex flavor profiles in their food and beverages. The rise of tequila, with its distinctive taste derived from agave, aligns with this trend, as consumers seek out experiences beyond the neutral flavor of vodka.

Worldwide Social Trend (name, detailed description):

Globalization of Beverage Palates: While the article focuses on the US market, the increasing popularity of tequila is also observed in other parts of the world. This suggests a global trend of diversifying beverage choices and a growing appreciation for spirits from different cultural origins, indicating a worldwide shift in drinking preferences.

Social Drive (name, detailed description):

The Pursuit of Novelty and Status: Consumers, particularly in social settings like bars and restaurants, are often driven by the desire to try new and exciting things (novelty) and to choose options that reflect a certain image or status (prestige associated with premium tequila). This social drive contributes to the adoption of trending beverages like tequila.

Learnings for brands to use in 2025:

• Embrace Regionality: Understand and cater to the specific spirit preferences in different states and regions. Marketing efforts and product availability should be tailored to local tastes.

• Invest in Premiumization: For vodka brands, focus on developing and marketing higher-end offerings to capitalize on the growing ultra-premium segment. For tequila brands, continue to build on the perception of quality and craftsmanship.

• Master the Cocktail Menu: Recognize the crucial role of cocktails in driving spirit volume. Collaborate with bartenders to create innovative and appealing vodka and tequila-based cocktails that resonate with current trends, like the Espresso Martini for vodka.

• Monitor Emerging Trends: Continuously track data and consumer feedback to identify new trends and adapt product portfolios and marketing strategies accordingly. The rapid rise of tequila is a testament to the importance of staying ahead of the curve.

• Leverage Digital Platforms: Utilize social media and online channels to engage with consumers, showcase cocktail recipes, and build brand awareness, particularly around trending spirits like tequila and innovative vodka offerings.

Strategy Recommendations for brands to follow in 2025:

• Vodka:

  • Highlight Versatility and Innovation: Emphasize vodka's role as a versatile cocktail base while introducing new and exciting flavored or infused vodka options that cater to evolving tastes.

  • Strengthen Presence in Key Cocktails: Invest in marketing campaigns that link vodka to successful and trending cocktails like the Espresso Martini, educating consumers on its importance in these drinks.

  • Focus on Sustainability and Craft: Communicate any unique production methods, sustainability initiatives, or craft elements that differentiate their vodka brands, particularly in the premium and ultra-premium segments.

• Tequila:

  • Expand On-Premise Distribution: Ensure wide availability in bars and restaurants across all regions, not just those where tequila currently leads.

  • Educate Consumers on Different Tequila Types: Offer guidance on the nuances between blanco, reposado, and añejo tequilas and suggest appropriate cocktails for each.

  • Partner with Influencers and Bartenders: Collaborate with key figures in the beverage industry to create signature tequila cocktails and build buzz on social media.

• All Brands:

  • Invest in Data Analytics: Utilize sales data and consumer insights to make informed decisions about product development, marketing, and distribution.

  • Explore Ready-to-Drink Options: Consider developing high-quality ready-to-drink cocktails featuring vodka or tequila to cater to convenience-seeking consumers in the on-premise setting.

Final sentence (key concept) describing main trend from article (which is a summary of all trends specified), and what brands & companies should do in 2025 to benefit from trend and how to do it.

The undeniable surge of tequila in the on-premise market signals a critical juncture for spirit brands in 2025, requiring vodka companies to innovate and premiumize while urging tequila brands to capitalize on their momentum through expanded reach and diverse offerings, all guided by regional insights and a deep understanding of evolving consumer cocktail preferences.

Final Note:

• Core Trend: The Tequila Takeover: Tequila is rapidly gaining market share in the on-premise spirits market, challenging vodka's long-standing dominance.

• Core Strategy: Adapt and Differentiate: Spirit brands must adapt to the evolving market by innovating their product offerings, focusing on premiumization, and differentiating themselves through unique qualities and effective marketing that resonates with regional preferences and cocktail trends.

• Core Industry Trend: The Rise of Agave: The increasing consumer preference for tequila points to a broader industry trend favoring agave-based spirits.

• Core Consumer Motivation: Seeking Flavor and New Experiences: Consumers are increasingly motivated by the desire to explore diverse flavor profiles and seek out new and exciting drinking experiences in the on-premise channel.

Final Conclusion:

The on-premise spirits market is in a state of flux, with tequila poised to potentially dethrone vodka as the volume leader. This dynamic environment presents both challenges and opportunities for spirit brands. Those that can accurately interpret consumer preferences, adapt their strategies to regional nuances, and innovate their product offerings will be best positioned for success in the evolving landscape.

Core Trend Detailed:

The core trend, "The Tequila Takeover," signifies a fundamental shift in the on-premise spirits market where tequila is transitioning from a secondary spirit to a primary one, achieving volume parity with vodka and demonstrating strong potential for further growth. This trend is not merely a statistical anomaly but reflects a change in consumer perception, appreciation, and consumption patterns regarding agave-based spirits in social drinking environments.

Key Characteristics of the Core trend:

• Volume Parity: Tequila has reached the same level of volume sales as vodka in the US on-premise market, indicating a significant increase in its popularity and consumption.

• Growth Trajectory: Unlike vodka, which is experiencing a volume decline, tequila continues to show positive growth, suggesting a sustained upward trend.

• Broadened Appeal: Tequila is no longer confined to traditional Mexican cocktails but is increasingly being used in a wider variety of mixed drinks, appealing to a broader consumer base.

• Regional Strength: While national data is significant, tequila's leadership in key states like California, New York, and Texas highlights its strongholds and potential for further expansion.

Market and Cultural Signals Supporting the Trend:

• Increased Tequila Consumption in Cocktails: The growing popularity of tequila-based cocktails beyond the Margarita, such as Palomas and spicy margaritas, indicates greater versatility and consumer acceptance.

• Celebrity Endorsements and Brand Building: High-profile celebrity involvement in tequila brands has raised awareness and desirability of the spirit.

• Growth of Premium and Ultra-Premium Tequila: The increasing availability and consumer interest in higher-end tequila expressions reflect a maturing market and a greater appreciation for quality.

• Social Media Influence: Platforms like Instagram and TikTok showcase a wide array of tequila cocktails and experiences, contributing to its trendy image.

How the Trend Is Changing Consumer Behavior:

• Increased Experimentation: Consumers are more willing to try tequila-based drinks and explore different flavor profiles beyond the familiar taste of vodka.

• Shifting Cocktail Preferences: Bartenders are increasingly featuring tequila in their signature cocktails, leading to a change in the typical drinks ordered by consumers.

• Higher Spending on Tequila: The interest in premium tequila suggests consumers are willing to spend more for perceived quality and a more elevated drinking experience.

• Association with Different Occasions: Tequila is becoming less associated solely with celebratory occasions and is now being enjoyed in more casual social settings.

Implications Across the Ecosystem (For Brands and CPGs, For Retailers, For Consumers):

• For Brands and CPGs:

  • Increased investment in tequila production and marketing is warranted.

  • Vodka brands need to find new ways to differentiate and appeal to consumers, possibly through innovation in flavors or highlighting specific use cases.

  • Opportunities exist for CPG companies to develop tequila-based ready-to-drink cocktails.

• For Retailers:

  • Bars and restaurants should ensure a diverse selection of tequila options, including different types and price points, to cater to growing demand.

  • Liquor stores should also stock a wider variety of tequila brands to meet consumer demand for at-home consumption.

• For Consumers:

  • Greater access to a wider range of tequila options in on-premise locations.

  • More diverse and innovative cocktail menus featuring tequila.

  • Potentially more competitive pricing as the market evolves.

Strategic Forecast:

• Tequila is likely to surpass vodka as the top-selling spirit by volume in the US on-premise market within the next year or two if current trends continue.

• The premiumization trend within both vodka and tequila categories will continue, with consumers increasingly seeking out higher-quality options.

• The cocktail culture will remain a significant driver of spirit consumption, and brands that can effectively tap into emerging cocktail trends will thrive.

• Regional preferences will continue to play a crucial role, requiring brands to adopt localized marketing and distribution strategies.

Areas of innovation (based on discovered trend):

• Vodka: Development of unique flavor profiles, infusions, or production methods to stand out from the competition. Focus on specific cocktail pairings and bartender collaborations.

• Tequila: Exploration of new aging techniques, sustainable production practices, and education initiatives to deepen consumer understanding and appreciation.

• Both: Creation of innovative ready-to-drink cocktails that offer premium quality and unique flavor combinations. Leveraging technology for personalized cocktail recommendations and experiences.

Final Thought (summary):

The American on-premise spirits landscape is undergoing a significant transformation, marked by the remarkable ascent of tequila, which now stands shoulder to shoulder with the once unchallenged vodka. This shift underscores evolving consumer palates, the dynamism of cocktail culture, and the enduring importance of regional preferences. For brands to navigate this changing terrain successfully, strategic agility, a commitment to innovation, and a deep understanding of consumer motivations will be paramount in the years to come.

Source: https://cgastrategy.com/is-vodkas-reign-in-doubt/