Mexican Wine And Beer Sales On The Rise In The U.S.

tendata blogTrade Trends News

ten data blog09-10-2023

· Since the turn of the century, Mexican liquor and beer have grown in popularity among U.S. consumers and gained significant market share in the country's alcoholic beverage industry.

· Effective marketing, changing demographics and evolving consumer trends are driving demand for tequila, mezcal and beer brands such as Modelo Especial and Corona Extra.

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Americans are drinking less than ever before, but when they do indulge, they're more likely than ever to choose drinks originating in Mexico.

The U.S. is the largest market for Mexican tequila spirits and its top-shelf beers. In recent years, Mexican brands have come to dominate the U.S. alcoholic beverage industry as drinkers crave higher-priced products with authentic backstories.

Last year, Mexico's native agave spirits tequila and mezcal surpassed U.S. whiskey to become the second fastest-growing spirits category in the U.S. in terms of revenue and volume, according to an analysis by the U.S. Distilled Spirits Council, an industry trade association. Nearly 30 million nine-liter cases of tequila and mezcal were sold in the U.S. in 2022 alone.

Experts say the segment is on track to overtake vodka as the country's fastest-growing spirits category by volume in 2023.

"Tequila has always been a national treasure in Mexico," said Guilherme Espagnoli Martins, global brand director for Diageo's Don Julio Tequila. . "Now it's breaking through geographically and flying to other countries."

"It's making Mexico famous," he says.

The evolution of Mexican alcoholic beverages into the American mainstream over two decades is the result of authentic and savvy marketing designed to make Mexican brands beloved by consumers outside the brand's home country while still resonating with their traditional markets.

Other factors driving increased sales include consumers' increasing willingness to spend more on higher quality products such as wine, spirits and beer.

Growth in tequila and mezcal has been particularly driven by sales of premium or high-end brands such as Casamigos and Don Julio, which retail at higher prices and are made from 100 percent agave with no flavors or additives.

Casamigos, founded by George Clooney, entered the market a decade ago, paving the way for other celebrity-owned premium tequilas, and so far it's the best-selling tequila of the year on liquor e-commerce site Drizly, a Drizly spokesperson told CNBC. . Don Julio is the second.

DISCUS found that overall sales of tequila and mezcal in the U.S. have grown 273 percent since 2003, an average of 7.2 percent per year, while premium tequila spirits have soared 1,522 percent. All of the products driving the tequila boom are from Mexico. Although some brands such as Casamigos are based abroad, the spirits must be legally produced abroad.

Don Julio, a Mexican company with a history of more than 80 years, is now owned by British spirits giant Diageo. The company is in the process of rebranding and achieving new success amid a new wave of tequila appreciation. Martins said Don Julio's smooth flavor, versatility and perception as a purer, cleaner spirit drove the product's growth.

A spokesperson told CNBC that the brand ended the year with double-digit global sales growth and is on track to grow 20 percent from last year by 2023. Last month, the company unveiled a new look and promotional video in an attempt to replicate its success in the U.S. overseas.

"As we take this brand global, we have a huge responsibility to put modern Mexico on the world stage," Martins said of the campaign.

The Mexican Beer Boom

It's not just tequila and mezcal - Mexican beer is booming, too.

According to alcohol research firm Bump Williams Consulting, U.S. imports of Mexican beer will grow 10.6 percent by 2023.

Earlier this year, Mexico's Modelo Especial became the best-selling beer in the U.S., replacing Bud Light, which had held the top spot since 2001.

TD Cowen analyst Vivien Azer said, "Once (the beer's owner) Constellation acquired Modelo, the company was really able to ramp up its marketing investment and drive tremendous growth."

In 2013, after an antitrust deal prevented rival Budweiser InBev from acquiring Modelo from buying the brand. Its rise began before the conservative boycott of Budweiser InBev Bud Light this spring.

Modelo and Constellation's Corona Extra have both benefited from the steadily growing Hispanic population in the U.S., Azel said. But the company is also looking for growth outside of Hispanic drinkers.

Azeer said, "This is a well-thought-out strategy by Constellation to diversify away from Hispanic consumers and toward a broader market."

A Constellation spokesperson told CNBC that Mexican beer sales have grown as Hispanic culture has taken hold around the world.

"The popularity of Mexican beer is in part related to the growth of the Hispanic population and its influence on the culture," the spokesperson said. "Younger generations are becoming more bicultural, and Latin culture is having a huge impact on the mainstream."

Constellation reported quarterly results Thursday that beat Wall Street expectations on surging demand for its Mexican beer brand.

The company behind the beer's growth also attributed its success to one simple factor: taste. Jonnie Cahill, chief marketing officer for Heineken USA, the distributor of Mexican beers Dos Equis and Tecate, said Mexican beers are "very easy to drink.

Cahill said Mexican beers have not only shifted the consumer preference for lighter-flavored, higher-priced imported beers, but the category has also been boosted by "authentic" marketing, such as the pairing of limes and beer, which is played out in commercials, bars and festivals such as Cinco de Mayo.

"Whenever we innovate, we focus on authentic Mexican flavors and avoid randomness because that's the opportunism that people often reject," Cahill said of Heineken's Dos Equis brand, which peaked in the mid-2000s with its iconic "World's Most Interesting Man" campaign.

It's a competitive space, Cahill acknowledged. Dos Equis sales have declined in recent years. For the week ending Sept. 9, Dos Equis out-of-store retail sales were down 1.7 percent, while Modelo and Corona were up 10.6 percent and 3.3 percent, respectively, according to Bump Williams Consulting.

Cahill said the brand is working to expand distribution in the U.S. in hopes of competing with its rivals.

Family Matters

Eduardo "Lalo" González grew up in the tequila fields where his grandfather, Don Julio, built a tequila empire with operations throughout the world.

"I've always had this dream and idea to continue this legacy of my family," González says. "Believe it or not, there is a lack of Mexican ownership of the tequila brand."

Diageo acquired Don Julio in 2015, and in 2020, González launched LALO Tequila, a white tequila with no flavors or additives distilled from 100 percent agave from González's home state of Jalisco, the Mexican state where tequila can be legally produced. Jalisco is one of five states in Mexico where tequila can be legally produced.

As the brand begins to gain a foothold in the U.S., Gonzalez says, "It's all about embracing family, embracing heritage and tradition." "We're building our own story by honoring our ancestors and by integrating people into our culture. "

What's next for the category?

Gonzalez said prices for tequila and mezcal could rise as demand continues to surge in the U.S. and there is a shortage of agave plants. Agave takes about seven years to grow and can only be grown in certain areas of Mexico.

Gonzalez said more and more farmers are harvesting succulents as the industry plants the seeds for similar growth in overseas markets.

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