How To Start Your Own Tequila Brand
How To Start Your Own Tequila Brand – We’re Grover and Scarlett, tequila fans who don’t seem to get enough. We live in Tlaquepaque, Jalisco. We are the founders of the Tequila Matchmaker app and website.
Each week we receive at least 2 emails from people who want to start their own tequila brand, looking for directions on how to get started. This is not really part of what we do – we focus on taste, education and information on existing products. So we thought we’d put together the advice we usually give to aspiring brand owners, all in one place.
How To Start Your Own Tequila Brand
So, do you want to start your own tequila brand? We love tequila, so we get it. But we cannot knowingly advise you to do this as it is a risky investment. Do not you believe it? Let’s take a look at some real-world stats.
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The Tequila Matchmaker database currently contains 2,345 different brands of tequila. How many of these can you name on top of your head?
In 2019 alone, we saw 181 new brands enter the market and fight for shelf space with hundreds of others. How many do you think are making money? Honestly, it’s hard to tell, since so few are publicly traded (and therefore have to release financial data).
But you may be wondering how many brands you see on the shelves of your local shop / cafe. They are likely to be the same 20 to 30 everywhere you go, and many of them come from large players who rely on a broad portfolio of products and revenue streams.
So, fierce competition is a problem, now let’s talk about costs. If you are looking to start your own brand in the near future, current agave prices alone will give you a break. At a rate of 28 pesos / kilo, a truckload of agave needed to fill a 25-ton oven would cost you around $ 36,000 USD.
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“There has probably never been such a difficult time to launch a new tequila brand given the prices of agave,” says Clayton Sczcech, Mexico-based agave spirits expert and consultant.
And even if you wait for agave prices to drop, be prepared for another sticker shock.
“This is a capital-intensive industry,” says Guillermo Erickson Sauza, owner of Tequila Fortaleza. “When you get to 1,000 crates, you realize you need more money to expand (for) production, inventory, barrels, facilities, marketing and so on!”
Let’s do the math. The biggest cost right now is by far that of agave, at $ 11.33 USD for a 1-liter bottle of traditional blanco tequila. If you want to cut costs, you can use a diffuser and save around $ 5.71 per liter. But for the sake of argument, let’s assume you want to make a high-quality, small-batch tequila blanco traditionally prepared.
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When you add the cost of packaging, even though you’ll be using inexpensive standard bottles, labels, and caps, and add excise, distillery fees, collection, and transportation, you’re looking at around $ 15.86 USD in cost just to make your own product.
So you have to consider the markups that appear at the distributor and retail level. This brings the price to around $ 25.40. This does not include the cost of marketing, public relations, your time, travel expenses, sample product for the offering, or salary. Let’s say you will need to add $ 10 / bottle to cover these costs because you won’t be selling high volume right away. You are now looking at around $ 35 USD to start making a profit.
Now take a look at the tequilas you are competing with in the $ 35- $ 45 USD range. Can you afford to play this game?
Okay, so maybe you have deep pockets and are willing to fund your brand in the medium and long term. Then proceed …
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There are so many tequilas on the market these days that you really have to wonder what niche your new tequila would fill. What would make it different from what’s already available?
“Great tasting juice and an attractive package, those are at stake,” says Greg Cohen, a Dallas-based marketing consultant who specializes in liquor brands. “The challenge is to show how and why your brand satisfies an unmet need in the market,” he adds.
How about a quality and affordable tequila? There are a handful of tequilas that already do a good job at this. A luxury tequila for people who really like wood (maybe whiskey lovers)? This category is overflowing with contenders.
There is always room for a high quality tequila, traditionally prepared with unique aromas and flavors in our opinion, but this is not necessarily the fastest route to mass market success, so if you go this route you need to have passion and patience.
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So you understand why your tequila should exist, do you know how it should be made? There are a variety of traditional and industrial processes in use that can radically affect your final product.
Whether you are building your own distillery or outsourcing an existing distillery, you need to know the different types of tequila production processes. Don’t try to do all your research online. You have to come to Mexico, visit the distilleries, meet the tequila makers and really see how things work and try! – on the ground.
And much of that is “understanding the dynamics of the agave price cycle and how it relates to different types of tequila production,” says Szczech.
This is because when and how you make your tequila affects not just cost and quality, but the industry as a whole. Growers who choose an industrialized spreading process tend to use younger agaves, taking them off the market before traditional growers, who rely on mature agaves for their higher sugar content and complexity of flavor, use them.
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What kind of producer will you be? Start by identifying the brands you like and learn what it takes to make quality tequila.
But that is not all. You will also need to learn about Mexico’s complex tequila regulations, how to register your trademark, and how to get your labels approved from both the United States and Mexico.
If you want to create a quality product, you need to learn how tequila is made, how to taste and evaluate it, and understand the profile you want and what it takes to make it. This takes time and at least one Tequilero patient is willing to take you under his wing. Otherwise, you may end up being exploited.
A tiring note here: “Sweet” and “smooth” are over the top. Vanilla was also added. Beware of additives (and know the difference between a tequila with natural flavors and flavors and those that rely on the addition of sweetener, caramel coloring, glycerin and “agave flavorings”). Try everything from popular mass market brands to small producers. Ask questions like “Why does this tequila have more agave than others?”? “What is the difference between the process and the agaves used?”
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Each brand will start with a few sample ranges and it will be essential to know what you are feeling and liking you (and your prospects).
If you don’t have your own distillery, you need a partner. This can be tricky, especially if you don’t speak Spanish. According to the Tequila Matchmaker distillery database, there are currently 135 active tequila distilleries in Mexico. Finding the right one is not easy because each distillery is unique.
You should start by doing your homework. Which distilleries are able to produce the flavor profile you are interested in? You can start your research by scanning the rankings of our tequila distilleries to get an idea of the overall quality of the tequila they produce, based on user reviews of the Tequila Matchmaker app.
Once you find what you like, will they also give you the time of day? Not all distilleries are willing to “white label” their product.
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And the distillery owners we know who make great tequilas traditionally produced in small batches are few and wary when taking on new brands. This is for a good reason: they have to be worth the time and effort because their reputation is at stake as well.
“I want to know that (a new brand partner) has the right motivation and a partnership with them will be sustainable,” says Salvador Rosales, Jr. of Tequila Cascahuin. His family-owned distillery has a lot of interest from aspiring brand owners, but their small-batch artisanal approach means they have to be very selective.
For example, one brand that made the cut is Siembra Spirits, owner of the highly regarded Siembra Valles tequilas. Brand owner David Suro is a well-known supporter of small-batch artisanal products and his support for agave growers and integrity matched the values of the family owners in Cascahuín.
It’s not a good idea to rely solely on your tequila preferences or even your friends’ preferences. If you are going to invest millions of dollars in it, you need to be sure that the tequila in your bottle is what it needs to be. Objectivity is key.
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