Targeting
Tequila market analysis
The sales volume of the American core market showed a continuous growth since 2004 and reached 13.8 million 9 litre cases sold in 2014. The tequila brand Jose Cuervo represented over 20 percent of United States tequila volume sales in 2014. The latest consumption statistics illustrate that over 24 million people drank tequila in the United States as of spring 2015.
To continue the comparison between the Belgian and British market, here are our estimations on growth in Belgium:
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Tequila consumption (2014) in the UK: 48,749,000L
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Tequila consumption (2014) in Belgium ( ratio of the populations 11/64 ): 341,000L
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In the UK, the registered a growth of 36% over 5 years and 9% during the last year
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Growth in the UK (in litres): - 251,000L over 5 years
- 313,000L over the last year
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Application to Belgium (in litres): - 28,000L over the last year
- 90,000L over 5 years
Retail value of luxury tequila/mezcal worldwide from 2010 to 2020 (in million GBP)
Analysis of the competitors
Many different companies exist on the Belgian premium tequila market. Most of them offer different brands and ranges of products based on a selection of differently priced bottles. Some of our direct competitors (companies selling tequila) stand out from the others.
Diageo is the largest spirits production company in the world: they own 26% of the global market shares volume-wise. Their turnover was just under $16 billion in 2015. The company owns the “Don Julio” brand, one of the most famous tequilas created in 1942.
Patròn is a company created in 1989, who entered the ultra-premium tequila market, a category of tequila that did not exist at the time. From 2001 to today, the company registered a sales increase of almost 2000% and in 2014, the sales volume was 2.2 million 9 litre tequila crates (18.4 million litres).
Joes Cuervo is the bestselling tequila in the world with 35% market shares in 2013. The brand belongs to the group Jose Cuervo La Rojena, and has existed for more than 250 years.
Just like Jose Cuervo, Sauza is a tequila brand with high volume sales: in 2014, more than 3.7 million 9L tequila crates were sold. The brand is owned by Beam Suntory, who hold 6% of the premium alcohol sales worldwide.
Premium tequila is not very popular in Belgium. During the interviews we conducted and by analysing specialised spirits reviews, we determined that premium tequila is not present in Belgium. Most tequila sold in supermarkets are mostly low quality tequilas. Moreover, the barmen explained that when people order tequila, it is to drink it as a shot with salt and lime, meaning they do not savour it.
To verify the information we obtained from the barmen, we analysed the tequila market’s evolution over the past few years.
First of all, the sales volume of the American core market showed a continuous growth since 2004 and reached 13.8 million 9 litre cases sold in 2014. The tequila brand Jose Cuervo represented over 20 percent of United States tequila volume sales in 2014. The latest consumption statistics illustrate that over 24 million people drank tequila in the United States as of spring 2015.Finally, the graph below shows the steady increase of premium (luxury) tequila sales.
Quantifying the market
Targeting only some people of a given population will allow our company to adapt a more focused and efficient approach in order to engage itself with its potential clients. At this point of the marketing plan, it is important to say that a start-up like ours must not target a too broad market.
Among the four segments that were mentioned before, we found that one of them would be easier to get in touch with.
The segment that turned out to be the most attractive and that we will target is the experimenters segment.
According to several bartenders and due to the rise of premium spirit markets, customers are increasingly looking for quality. Moreover, it has become a determining factor in the choice of their consumption, as the survey illustrates. This quest for quality is accompanied by the development of a curiosity around alcohol. The evolution of the alcohol market and its premiumisation led to the number of consumers to grow.
The experimenters’ segment therefore seemed attractive according to the information we had received and analysed. These consumers like to experiment and discover new things and that is exactly what we will be offering them. Intuitively, given that they pay less attention to prices concerning premium alcohol prices, and that their main goal is to discover, the choice of this segment seems absolutely coherent.
In contrast, the other segments did not seem the right ones to target. First of all, connoisseurs are a segment that is very precise and hard to target for a start-up. Secondly, penny pinchers are a non-factor as our product is too expensive. Thirdly, trend followers or social drinkers cannot be targeted as our product is not trendy enough for them to order it spontaneously.
Initially, let’s recall the hypothesis we made that the Belgian alcohol market was similar to that of Great Britain. Tequila sales increased substantially over the last five years, as a 36% growth was registered. All segments mixed up, we observed an increase in tequila consumption and can conclude that experimenters therefore also increased their consumption.
The survey we conducted confirmed this proposition: of the 196 people who took part in the survey, 136 confirmed that they consume spirits. Then among these consumers of spirits, 58.1% of them (75 people) considered themselves as experimenters.
Regarding the size of our segment, after analysing the Belgian market, we were able to approximately quantify how many experimenters there are.
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We took the population of two of the adults in Brussels (819.000)
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As said before, 17% of the population drinks spirits
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139.230 potential consumers can be found in this city
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Our survey revealed that around 60% of consumers consider themselves as experimenters
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That brings our total consumers to 83.538 in this segment
This number doesn’t seem big at first but it is important to start by targeting a small and heterogeneous population. The reasoning that led us to this idea is simple: it is impossible for a start-up to rival Sauza and Cuervo.
Competitive advantage
Risk level and attitude regarding it
Why did we choose this segment ?
Size of the segment
The experimenters segment is quite risky but there clearly is a way to make the most of it and make profits. The major risk we face is that these consumers are, by definition, open to new things and that they often change products, depending on the trends. This does not mean that they will only try our tequila once but their consumption may be more sporadic. Experimenters need to change products and discover new things, as they will restrict themselves to our product. However, this risk must be taken as it is also possible to make our customer base loyal as we offer a quality product that distinguishes itself from the ones available today.
This last observation leads to a specification concerning our segmentation. The connoisseurs segment is not directly targeted by our marketing strategy and may represent, in the future, a significant portion of our customers. Some experimenters that we target in priority will eventually become experts, after drinking tequila for a certain time. Our goal is to capture these future experts and include them in our targeted customers.
It is clear that on the contrary with the market leaders, who have the advantage of brand name recognition, we cannot use our aura at the beginning. However, this is not an essential tool to have in the segment we are targeting. Indeed, experimenters are curious by nature and are not scared of the unknown. Thus, we must keep this in mind when determining our competitive advantage.
When collecting our information directly with the barmen, they spoke about different alcohols who were about to be successful. They talked about vermouth, tequila and cider among others.
Given that today, the premium tequila market is less developed in Belgium, the advantage that we have over our competitors is that our tequila brand would be the first one in Belgium associated by experimenters with a premium tequila. Our brand will therefore be the “face” of the premium tequila market as our competitors have not launched their marketing campaign yet.
We therefore decided to deepen our knowledge on tequila and the market surrounding it to make sure it was a feasible product to launch with our start up.