Market Watch, April 2018

APRIL 2018 MARKETW ATCHMAG COM MARKET WATCH 47 PHOTO BY TK TK Another category star is Montelobos Mezcal Joven 40 a 750 ml imported by William Grant Sons The brands depletions grew by more than 80 in 2017 and brand manager Shem Blum anticipates the category will continue its rapid growth as consumer demand increases Using mezcal in cocktails is a great way to expose people to the spirit and drive growth Blum says Mezcal has the most complex flavor profile of any unadulterated and unaged distilled spirit Growth and exposure began in major markets like New York City Los Angeles San Francisco Chicago and Miami but there has also been fairly rapid expansion into mid and small scale cities Joen Choe the vice president of marketing at Sombra mezcal parent company Davos Brands agrees that the cocktail communitys embrace of mezcal has done wonders for the category Choe says that the widespread popularity of mezcal in mixology has helped introduce the spirit to new and discerning consumers and also helps reset the spirits image for those who had negative past experiences He notes that people who enjoy Tequila Scotch and other spirits with sophisticated flavor profiles comprise a large part of mezcals consumer base Sombra Mezcal Joven 35 a 750 ml surged by triple digits in 2017 according to Choe Mezcal continues to be one of the fastest growing categories in spirits driven by the general popularity of artisanally produced spirits that have roots and history behind them Choe says More multinational companies are entering the category which is great overall as long as they can maintain a commitment to authentic production methods and quality as they scale Supply And Demand As mezcals growth rates increase supply issues are becoming a concern Danny Mena a partner in Mezcales de Leyenda which is imported by M S Walker says the spirits popularity is draining Oaxaca of the Espadín variety of agave which is the most popular agave used to make mezcal He adds that the spirits increasing growth over the last five years shows no signs of slowing down Blum doesnt anticipate any supply shortages for Montelobos which produces its own agave but he does cite strong demand and deforestation of wild agave as putting a strain on supply for much of the category Demand has taken a toll on the agave plant in Oaxaca where weve seen the price of the plant triple over the past two years and we still expect the price to rise for the upcoming two years Mena says High end mezcals produced by small distilleries come in and out of stock regularly As an industry we have yet to understand what would happen if the demand were to really increase and mezcal were to become a major category One advantage Mena says is that mezcals legal denomination of origin is geographically huge encompassing a lot of physical space for agave growth And part of what makes mezcal special he adds is how its made slowly and rather inefficiently by hand produced craft methods which all add up to a higher price tag If mezcal were to become mass produced as some brands have done it would lose all character and flavor Mena says Mezcales de Leyenda has enjoyed 50 year on year growth for five years Mena adds The brand offers six expressions including Oaxaca 65 a 750 ml Guerrero 80 and Durango 80 and it released a series of ultra premium labels this past fall from Grandes Leyendas 250 to Mezcales Únicos 500 The high price tags for upper end mezcals appeal to a specific small set of customers Khris de la Torre the bartender advocate for Proximo Spirits Creyente mezcal 50 a 750 ml notes that his brand is most popular with young affluent consumers Playing at the higher end of the price spectrum helps mezcals image and helps consumers understand and appreciate the complexity and character of the spirit as well as the agave plant at different maturity stages de la Torre says The rise in popularity of mezcal cocktails has expanded awareness of how different strains of agave plants and different regions in Mexico can produce different mezcals much like wines and whiskies Experimenting with the different varieties and flavors of mezcal is a great way to increase consumer education For Bozal mezcal which is owned by 3 Badge Beverage Corp getting into the hands Both Mezcales de Leyenda Durango expression pictured top and Sombra fermentation above have seen massive growth in recent years posting gains in the double and triple digits respectively