The numbers don’t lie: it’s time for tequila. According to the IWSR, US tequila consumption rose 27% in 2021 and is expected to surpass vodka sales by 2023, putting tequila on track to be the US’s most-purchased spirits sectors.
Despite the pandemic’s challenging environment, premium tequila sales are soaring as global drinkers realized the potential of sipping tequilas. The Distilled Spirits Council of the United States (DISCUS) notes that luxury brands grew 15% in the third quarter of 2022 compared to the year prior. ResearchandMarket.com anticipates that the global tequila market size will reach $14.35 billion by 2028. Impressive numbers for a category once considered just a party drink.
Until recently, two brands (Clase Azul and Don Julio 1942) dominated the ultra-premium tequila market, accounting for a 90% share of US dollar sales. As the premium category expands, new players are getting into the market. Established brands are rolling out aged or experimental expressions (like Cristalino), while new brands are catering to the premium drinker.
Amidst tequila’s global expansion, 818 has moved big numbers, going from a small Los Angeles launch to expansions into the China and Dubai markets in just a year and a half.
The success is partly due to Kendall Jenner’s co-sign. “Kendall has always been interested in tequila,” says 818’s President and COO Mike Novy. “But when she started to participate in it as a consumer, she found there wasn’t a tequila that spoke to her as a consumer.”
And while Jenner is new to the tequila market, Novy is not. His resume includes long tenures at Gallo, Constellation
818 closed out 2022 with 120,000 9-liter cases in sales under their belts. “It’s good — it puts us in the big leagues in terms of results,” says Novy. “Our idea has been nicely validated by the market.”
What’s next in the tequila category and what can brands learn from this rapid rollout? I talk to Novy to take a temperature check on the agave spirits space.
Kate Dingwall: You’re moving big numbers, especially coming out of the first year or two of the brand. Unsurprising though, considering your background and Kendall’s involvement.
Mike Novy: My entire career has been in alcoholic beverages. But while I have decades of experience working with big companies with a highly structured approach, this is the first ground-up business launch I’ve worked on. I’m enjoying it — I’m the second employee to join the company, so it’s been a fun experience learning to wear a lot of hats and learning to move with the mistakes. You don’t know where the potholes will be until you hit it.
Dingwall: You launched the brand mid-way through the pandemic. It turned out to be the perfect time for a premium tequila brand to come to market.
Novy: We had no idea the category was going to explode like this. The tequila category is white hot and it’s growing all around the world. We’re seeing incredible growth in North America.
We’re also seeing huge success in China. We didn’t expect that — China isn’t a tequila market. Honestly, we were confused. Our importer told us to not have big expectations. We started with one container and expected to follow up with a pallet here and there. Within six months of launching in China, we shipped our fifth container. We’re now the largest super-premium tequila in China.
The category is transcending. With the brand positioning that we have, we’re pulling people from categories like Cognac into the tequila category, which is exciting for building tequila awareness in different markets.
Dingwall: It’s that premium consumer — the ones who purchase spirits for the lifestyle.
Novy: The label is very recognizable and the name is very approachable – it brings in quite a diverse group of drinkers.
The day we launched, we were only for sale in Los Angeles county. That day, people from 73 countries around the world tried to purchase the bottles online. We can’t ship to them yet, but we still receive calls and messages every day from people around the world. We’re using these requests as a guide to where to grow next. If people are asking for us here, that’s where we need to be.
Dingwall: The ask-for-it-by-name ethos of 818 feels a little like you’re operating from the Tito’s playbook. You don’t ask for a vodka, you ask for Tito’s – that’s the kind of recognition and brand loyalty they’ve built.
Novy: One of Kendall’s goals was actually to become the Tito’s of tequila. It’s whole idea of clear and simple brand iconography – you can see the bottle across from the room and recognize it right away.
Dingwall: You’d certainly recognize the new 818 Reserve bottle across the room.
Novy: It’s sculptural, it has a very organic, friendly-feeling form.
Dingwall: Which leads us back to the quality. Before the brand launched and before any mention of Kendall’s involvement was announced, you submitted the liquid to competitions. It earned pretty impressive accolades at the World Tequila Awards.
Novy: That was Kendall’s idea — when she was working on developing the spirit, she started putting the liquids in competitions anonymously to test her palate. The concept was, “We like what we’re making, but do other people?”
Kendall always says she comes to this business with the mindset of the consumer. But she’s one consumer — does her palate represent what a bigger audience would like? It was effectively market research to see if they were making tequila that would be respected by industry experts.
Dingwall: While there’s been conversations around authenticity and celebrity, 818 has formed partnerships with really wonderful groups in the tequila space, like Sacred (Saving Agave for Culture, Recreation, Education and Development) Agave, a non-profit that works to remedy the damage done in communities by tequila production.
Novy: Some people love that about the brand, others don’t. Some bartenders shrug us off because it is a celebrity brand. And there are brands that sell lifestyle without substance, but you have to be able to do both.
With Sacred, we’re taking the spent fibers and liquids from the production process and mixing it with adobe clay and making bricks. Lou [Bank] and Chava [Periban] work with communities in Mexico to deploy these bricks. The currently have six programs going on, including a community center for kids to go to after school so they don’t get in trouble. [818 is also gearing up to meet B-Corp status.]