Top-shelf margarita (Photo by Jon Sullivan)

While Americans were chasing their bottles of Pappy Van Winkle bourbon, Mexican agave-based spirits snuck up and snagged second place behind vodka as the highest-valued adult beverage market segment. Fueled by the continued growth of on-premise margarita sales as America’s value cocktail, Tequila is encroaching on vodka’s 25-year dominance.

One of the driving forces is the proliferation of star-powered tequila brands- Casamiga (George Clooney), Teremana (Dwayne “The Rock” Johnson), and Cinquoro (Michael Jordan), among many. Additionally, market leaders Jose Cuervo, Don Julio, and even premium Patron are pumping billions into advertising, capitalizing on post-pandemic growth in on-premise liquor demand. Despite growing brand differentiation, tequila has yet to reach the heights of perceived quality commensurate with bourbon and scotch brands. Yet that may be part of tequila’s success.

CNBC restaurant reporter Amelia Lucas says tequila is “helping the spirits industry steal customers from beer.”

She quotes celebrity mixologist, and author Tony Abou-Ganim who helped T-Mobile Arena and Allegiant Stadiums create their adult-beverage programs, “A lot of people think when they go to an arena or stadium, ‘I’m just going to drink beer,’ and our feeling was, if we put a better margarita in their hands, they’re going to buy margaritas. And that’s proven to be the case.”

While whiskey continues to dominate package sales, cocktail consumption of whiskey is collapsing under its pricing weight. Bargoers are unwilling to shell out for mixed drinks made with super-premium brands. That said, tequila is meeting consumer trends in demand.

“It’s not just for margaritas,” says Christine LoCascio, chief of public policy for the Distilled Spirits Council of the United States (DISCUS). “There are so many high-end tequilas that you can sip and savor like many other high-end products, like whiskeys and cognacs and bourbons and high-end rums as well.”

If trends continue, tequila could overtake vodka as soon as this year. While whiskey may continue to dominate the ultra-premium and collector market segments, the on-premise party crowd are like to continue shouting, “una margarita más por favor!”