Just the Answer - Patrón Spirits Company
Riding the twin waves of a booming premium spirits market and growth in Tequila, The Patrón Spirits Company has made great strides in a short space of time. In this month's Just the Answer interview, Dean Best speaks with the company's COO John McDonnell, and Mike Hill, vice president, Europe, Africa and the Middle East, about the company's rapid progress and premium ethos.
J-D: What has driven the exponential growth of Tequila in recent years?
McDonnell: There are two key drivers behind the growth of ultra-premium Tequila. The first is that the cocktail culture has really come into its own in the US and people are experimenting with spirits. The Mexican influence in the US is another key factor. The total Tequila category is probably outpacing all other segments in the spirits industry and I don't see that changing in the short term.
J-D: What has been behind the development of Patrón?
McDonnell: The advertising and proposition that Patrón has to offer to the public; it's a good package; it's all about fashion, luxury and style. You can't discount the fact that we have great people in the company that know how to manage the business. We're a lean, mean machine but we come from great backgrounds and that's all contributed to the growth of Patrón. From 1989 to today, it's grown to 1.1m cases and it's not even 20 years old.
J-D: One analyst says that you are spending US$25m in marketing in the US. Has that been the main thrust behind the growth of Patrón in the US?
McDonnell: It's a totally integrated effort. One of the key factors is marketing and another is our sales force execution - both have contributed mightily to the growth of Patrón. We're also very active on the Internet (while) a lot of movie stars have also got behind Patrón and they've started to adopt the brand as their own. It's also in over 100 different songs played on the airwaves right now, so all of that has contributed. This has given us the foundation to start our international growth.
J-D: How cyclical is the demand for certain spirits categories in the US? Is demand for spirits more fashion-led?
McDonnell: I'm extremely bullish on the entire spirits category because the population and the demographics all favour spirits right now. You see different sectors getting a big boost but you don't see them dropping off. The velocity might slow down but there's not a decline.
J-D: To what extent is Tequila popular outside the US?
McDonnell: 88% of Tequila consumption is in the US and Mexico. The rest of the world has its own drinking habits. If you look at Asia, most of their consumption is Scotch and Cognac but now we're starting to see that change; vodka has grown tremendously in Asia.
J-D: Where are the international markets in which Tequila can get some kind of traction?
Hill: In my region, Russia has the biggest potential. It may only be 5% of the total population but in sheer numbers, there are a large amount of extremely wealthy consumers in Russia. With the fall of Communism and the opening up to Western brands and advertising, they're looking for quality - and they're looking to the West for that quality. Patrón, because it's 100% agave, because of the care we take in the production and because of its strength in America, it's the sort of brand that the Russians will adopt.
McDonnell: We have such a small percentage of the consumers of super-premium spirits. There are many markets that we can expand into, as well as tap into the growth of the markets we've just opened.
J-D: You say that Patrón is a "lean, mean machine". How do you hope to compete with the likes of Diageo in terms of getting your product to market?
McDonnell: It has been a challenge trying to find the right partner internationally and you have to do it on a market-by-market basis. The key factor in us finding the right partner is that they have the ultra-premium mindset when it comes to selling spirits
Hill: They also need to have complementary brands in that super-premium category. It isn't easy. It's going to be slow but it's going to be very focused because we are seeking the right distribution and the right support.
J-D: Could mass distribution dilute the ultra-premium cachet of your Tequila?
Patron's COO John McDonnell
McDonnell: Our game is not about volumes internationally, it's about quality points of distribution. We have a very focused portfolio. We have a rum, we have a Patrón Citrónge orange liqueur, we have a Patrón coffee Tequila liqueur and we have the Tequilas - that's our game. So we're not going in and asking a partner to take on 20 different labels, where every month there is a different priority. When we sit down with a potential partner, they know what our focus is and they know what our priorities are. It makes it very attractive for a distributor looking for an ultra-premium portfolio.
J-D: Who do you regard as your rivals?
McDonnell: When we look at our competitive set, we're not looking at Tequila, we're looking at ultra-premium white spirits, so gins, vodkas, rums and Tequilas are our competitive set.
Hill: We compete wherever consumers are used to drinking quality premium spirits, be they white or dark. If you sip a Cognac, you can sip a Patrón. We're about selling Patrón the brand, rather than selling Patrón the Tequila. If you do the right thing with a brand, then no other category gives you any fear because you're selling a brand. I'm sure BMW, doesn't fear Ford, Toyota or Nissan - why should they?
McDonnell: We're selling affordable luxury - not everyone can buy a BMW but they can afford to buy a Patrón Tequila.
J-D: How far down the line are you in realising your ambitions to move into vodka and gin?
McDonnell: We still have huge ambitions for vodka. Gin is (further) down the road. As with anything, it doesn't happen as quick as we would like. At this point, unfortunately, I have nothing new to report on that front. Any vodka, whether it is an acquisition of an existing brand or whether we create a new product, will hit the ultra-premium sector just like we have done with the Tequila.
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