The high price point of tequila is restricting growth of the spirit in supermarkets, according to Diageo’s MD for Great Britain.
Speaking after the London-listed company reported its full-year financial results on Tuesday (1 August), Nuno Teles said the interest in agave-based drinks was growing “very strongly in the trade” but was yet to translate to the off-trade in the UK.
“You see the trend starting very strongly in the trade,” he said. “The natural thing is for consumers to start adopting that consumption at home.”
Neither of Diageo’s major tequila propositions – Don Julio and Casamigos – made The Grocer’s Britain’s Biggest Alcohol Brands report.
It would be at least “a couple of years” before a tequila broke into the ranking, Teles predicted.
While tequila represented an opportunity to persuade consumers to trade up, high prices meant it was not an easy task, he said.
In Tesco, for example, the cheapest tequila per litre is Jose Cuervo Especial Silver 70cl at £30, compared with £15.33 per litre for the cheapest gin, Tesco London Dry Gin 1.5l.
Prices for Don Julio and Casamigos, meanwhile, currently begin online at about £45 for 70cl (£64.29 per litre).
Such prices were a barrier to driving growth in grocery’s BWS aisles – “and that’s something we as an industry must overcome”, said Teles.
Despite this, Teles said he didn’t believe promotions were the way to entice drinkers to the category.
He said: “It’s a category that you will see growing on the basis of a genuine interest in drinking that product rather than a promotional opportunity.”
Asked about the sluggish performance of Diageo’s Gordon’s gin brand, sales of which fell by £72.8m [NIQ 52 w/e 22 April 2023], Teles said it had suffered from increased competition in and outside the gin category.
“Drinkers have other alternatives – including tequila – available to them, so they don’t consume as often,” he said. “It’s more the frequency [of purchase] that’s the driver of lower business than the penetration.”
Elsewhere, Diageo’s newly appointed CEO Debra Crew said the company would continue to work with celebrities and influencers, despite David Beckham recently ending his partnership with Haig Club, and an ongoing legal dispute with Sean ‘Diddy’ Combs.
The rapper has accused the Johnnie Walker brand owner of racism and intentionally sabotaging the DeLeón Tequila brand.
“We have we have a lot of great partners, and with Sean we had a really terrific 15-year partnership that was mutually beneficial to both sides,” Crew said. “It’s a business dispute, it doesn’t change our philosophy toward partnerships.”
In the year ended 30 June 2023, Diageo posted net sales growth of 10.7%, with higher pricing helping to mitigate a dip in sales volumes. In the UK, sales grew by 7%, driven by growth in Guinness, tequila, vodka and RTDs.
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