Luxury Tequila Is Booming. Does The Brand That Started It All Still Matter?

Courtesy Patrón Spirits International

In the face of competition from artisanal brands, Patrón shifts its image from pure swagger to style with substance.  

Chances are you’ll never be invited to visit Patrón's new 20-room guesthouse in the town of Atotonilco El Alto, in the highlands of Jalisco, Mexico. Built next to the company’s distillery, it looks and functions like a boutique hotel, though it’s not open to the public. The private accommodations—complete with custom-made beds (bigger than a king), commissioned artwork (a more-than-one-ton sculptural chandelier dangles above the lobby), and craft cocktail bar (the lavender-infused Old Fashioned is a highlight)—are open only to visiting members of the trade, press, and “friends of Patrón.”

“We still have a lot of swagger,” says Lee Applbaum, Patrón’s chief marketing officer, explaining that the new digs are part of the brand’s efforts to get more “influencers” to visit the distillery so they can see for themselves how the product is made. “It’s time for us to show that we also have substance.”

In the last decade, tequila—at least, people’s perception of it—has evolved from party fuel to refined sipping spirit. Since 2002, the category as a whole has seen 158 percent growth in revenues, but the super-premium echelon—the highest of four segments—rose a whopping 640 percent. Patrón has a lot to do with that. 


The dining room at Patrón's new guesthouse in Jalisco, Mexico. Vincent Long / Courtesy Patrón Spirits International

The brand launched in 1989, a time when paying more than $10 for a bottle of tequila was a rarity. Just about all tequila available in the U.S. back then was what’s known as mixto: a mix of just 51 percent agave distillate and 49 percent unnamed “other sugars.” Socially, the spirit was almost exclusively associated with getting wasted on shots or premixed margaritas. Patrón’s plan to release a 100-percent-agave sipping spirit priced at just under $50 per bottle was borderline preposterous.

And yet, while Patrón is widely credited with birthing the luxury tequila movement, it wasn’t the first to try introducing Americans to the good stuff. Germán Gonzalez, the master distiller at T1 and Tears of Llorona, both super-premium brands, has fond memories of summers spent on his family’s agave ranches as a teenager. In 1983, he witnessed his father, Guillermo, sign the contract to export the 100-percent-agave Chinaco to the United States. At $25 a bottle, it would be the first luxury tequila to hit the U.S. market. But Americans weren’t quite ready for it.

“We did such small quantities of Chinaco,” says Gonzalez. “But it started a revolution.”

The revolution it sparked didn’t really take hold until years later when the founders of Patrón fell in love with a small-batch tequila from the Jalisco highlands and decided to market it to Americans. As the brand proved successful, they eventually poached the distiller and recreated the recipe in their own distillery (much to the chagrin of the original family, whose tequila is still a favorite among connoisseurs). How Patrón was able to break through where Chinaco couldn’t has everything to do with luck and marketing. Peddling its product as a luxury good, Patrón didn’t focus too much on educating its clientele on what tequila really was. It wasted no time discussing the nature of agave or production methods. Instead, Patrón’s marketing efforts underscored the lifestyle associated with drinking it, a glamorous hedonism befitting the carefree prosperity of the decade in which it came of age. Certain early fans of the spirit didn’t even know Patrón was tequila—it had little in common with golden shots taken with salt and lime. Patrón was in a category all its own.


Patrón's agave fields. Courtesy Patrón Spirits International

Thanks to the Hollywood connections of its co-founder, the Paul Mitchell hair care billionaire John Paul Jones DeJoria, and no shortage of publicity stunts—from high-profile blind tastings to skimpily clad “Patrón Girls”—the brand’s popularity spread from the west coast east. By 2003, it was selling 200,000 cases annually, having become a staple of VIP rooms and swanky parties, and was regularly called out in hip-hop lyrics. 

By that time, the rest of the industry had taken notice. Mexican brands made plans to broach the U.S. with 100-percent-agave bottlings once reserved for the domestic market. Spirits companies with no ties to tequila went to Mexico in search of small family brands to buy and rebrand for Americans. And independent premium brands began cropping up.

Nowadays, a couple dozen new brands launch each year, several backed by celebrities, from George Clooney to Sean (P. Diddy) Combs. Many newcomers fizzle out, but a lucky few gain a loyal following or else get bought out by a multinational. (Clooney’s Casamigos—Cindy Crawford’s husband, Rande Gerber, is a partner—is now one of the fastest-growing premium brands in the country. Sauza took a stake in Justin Timberlake’s 901 Tequila a few years ago, rebranding it Sauza 901. Moët Hennessey is the latest to enter the luxury tequila segment with Volcán de mi Tierra.) Patrón holds steady as the leading super-premium tequila in the U.S. Last year, the company sold 2.5 million nine-liter cases worldwide. By comparison, Don Julio does about 600,000 cases annually.

Being big, however, can be a challenge. Especially in an era when artisanal and small-batch sensibilities reign, Patrón has struggled with its image. The brand, long associated with opulence and swagger, wants to communicate a new message to consumers, one of handcrafted authenticity. It’s a tricky concept to sell for a company with 70 percent market share. 

“For a brand of our scale, it’s hard for consumers to wrap their heads around the concept,” says Applbaum. “We’re victims of our own success as marketers. But love or hate our place in popular culture, what sits behind that is authentic.”

Patrón has managed to maintain traditional production methods, including steaming its raw materials (agave) in brick ovens as opposed to using automated machinery, as many brands do. It crushes the agave using a combination of mechanical shredders and traditional stone mills, and ferments and distills in small batches. The facility, while huge, is actually set up like a series of smaller distilleries rather than one gargantuan factory. Applbaum is quick to point out that many brands try to market themselves as authentic and small-batch when, in fact, they use the same mechanized production methods as big-volume brands.


Patrón distills in small batches, using copper stills. Dylan Schwartz Photography / Courtesy Patrón International Spirits

“The challenge is that the rapid growth in this category has made it attractive for short-term players to come in and just harvest profit,” he says. “Whether it’s a celebrity throwing his or her name on a product [or] an existing company or entrepreneur coming in and buying finished product and putting it in artisanal-looking bottle… That’s not good for the category.”

Patrón executives are careful not to celebrate luxury tequila’s growth too eagerly. They’re aware of the company’s role in creating its own competition. But growth is what drives Patrón to stay relevant. The brand comes out with new expressions each year, like the Roca line launched a couple years back—one of the few modern tequilas made entirely from stone-crushed agave. This year, expect a new extra añejo expression, a style aged at least three years in oak barrels.

“When I started, in 1978, tequila was considered a drink for borrachos,” says Francisco Alcaraz, master distiller at Patrón. “I never imagined, back when [the founders] approached me, that it could grow like this… Or that, all these years later, I’d still be creating new tequilas.”

He has to, if Patrón wants to keep up with the boutique brands trying to compete for their share of the market. And, like it or not, those boutique brands have Patrón to thank for ushering in a world in which $50 tequila isn’t preposterous at all. 

 

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