Not everyone agrees on how to make a margarita, but one thing most cocktail enthusiasts do align on is that the cocktail has mass appeal.
The tequila showcase ranked as the number one cocktail at U.S. restaurants and bars again this year after a several-year streak in the top spot, according to data from the cocktail business consulting firm CGA. And unlike other cocktails that dip with the seasons, it’s also the most popular cocktail year-round at high volume venues. So what’s behind the almighty margarita’s staying power – and does its reign translate to canned cocktails?
“It’s not a pretentious cocktail at all,” said Kim Haasarud, owner of beverage consulting agency Liquid Architecture and Phoenix’s Garden Bar. “Whether you are a master mixologist or an at home bartender or a dive bar bartender everybody can relate to the margarita and everyone can make it.”
Julio Bermejo, owner of the iconic Tommy’s Mexican Restaurant in San Francisco, doesn’t agree that all margaritas are created equally. The temple of tequila is known for its take on the classic and its bar featuring distillery-owned and operated tequila brands. But the reasons for the drink’s popularity go beyond its refreshing, sweet and sour qualities when made correctly, he said.
“I think part of its success is because tequila companies never made the mistake that Scotch whiskey producers and cognac producers did of telling the guest how to drink their products,” he said.
Compared to other classic cocktails, margaritas are approachable, he explained, and serve as an introduction to the broader world of agave spirits.
Versatility is also part of the margarita’s appeal, as evidenced by versions that come frozen, with other fruit juices, a spicy kick, or mezcal-ritas.
That flexibility makes the cocktail an attractive menu item in the on-premise world – and it also provides a base for experimentation in canned cocktails. Emerging brands and big players are building off the cocktail’s rise and finding white space in margarita-adjacent beverages too.
RTDs Move In On Margaritas
Within the RTD cocktail space, margaritas tend to oscillate between the number two and three segment in sales, rising roughly 40% in 2022. That growth was slightly behind the overall spirit-based RTD average (58%) – boosted by the +76% gains of soda and seltzer cocktails – but still a primary source of incremental growth for the category, explained Dave Williams, VP of analytics and insights at Bump Williams.
“In the RTD world, vodka seltzer and sodas are far and away the leaders, but in terms of cocktail style, margaritas are number two,” he said.
Once dominated by major tequila brands like Jose Cuervo, canned margarita options have diversified for consumers since the wave of RTDs started washing into stores during the pandemic. Another result of lockdowns that may have whet drinkers’ appetite for more portable margaritas: to-go cocktails from their favorite restaurants and bars. With on-premise locations closed for indoor dining, margaritas were one of the easiest and most familiar cocktails to batch and sell to-go, explained Haasarud.
“Over the pandemic we did see a lot of margaritas that were done to-go even from some of the big chains like Applebees,” she said. “So I do think maybe that gave rise to more people drinking them at home, too.”
On Drizly, the number of RTD margarita brands grew 34% year-over-year in 2021, with more than 185 brands available on the platform last year. Cutwater Lime Margarita, which has the segment cornered, saw sales grow +46% in 2022 and was nearly two times higher than the number two margarita brand, On the Rocks Margarita, which was up +49%, according to Bump Williams data.
“Even if it’s not a margarita, but if it’s more of a lime or that tropical fruit first beverage, that’s what we’re seeing,” said Krueger. “The margarita itself is so flexible and versatile that it just lends itself to constant innovation.”
In the canned cocktail world, producers have latched onto some of those qualities, with even vodka-based RTDs mimicking the margarita style or shifting to tequila bases. This month E. & J. Gallo’s High Noon Sun Sips expanded beyond vodka with High Noon Tequila Seltzer, a tequila-based extension that comes in strawberry, lime, grapefruit and passionfruit flavors.
Other seltzer brands have made similar moves: Molson Coors is expanding Topo Chico Hard Seltzer this year with Topo Chico Spirited, debuting with two tequila-based flavors and one vodka-based. In January 2022, Boston Beer Company launched a margarita-inspired Truly Hard Seltzer and earned $148.4 million in off-premise dollar sales in its freshman year, enough to make it Truly’s No. 3 SKU and Boston Beer’s fifth best-selling product. It also launched tequila-based soda Loma Vista last year.
Tequila’s Rise Driving Innovation
One thing helping the category grow is that it is capitalizing on the rise of the margarita’s base spirit; the availability of both quality tequila and a variety of canned margaritas are likely fueling each other, Williams said.
Tequila sales grew 7% in 2022, settling at 13.5% share of the total spirits category, excluding any Tequila-based RTDs, according to Williams’ data. In 2022, tequila delivered $890 million in new supplier revenue, more than any other spirits category, according to the Distilled Spirit Council of the U.S. Unlike with vodka, success in the RTD category seems to be carrying over to the mother liquid.
That momentum has fueled the market for the emerging crop of ranch water brands, which have found some traction positioned as flavor-forward malt-based agave seltzers. Deviating from the original Texas recipe, many of the leading ranch water brands are not tequila based: Molson Coors’ Topo Chico launched a ranch water hard seltzer, joining brands like Lone River’s margarita-style Ranch Rita, Karbach Ranch Water Hard Seltzer from Anheuser-Busch InBev and Heineken’s Dos Equis. Lone River, which was acquired by Diageo after two years on the market, has experienced significant growth over the past few years, scaling 700% of share from 2020 to 2022 to date.
“Some of the first ranch water research that we did found that people generally thought that if it happened to be from Texas, or that it was coming from Long River or Karbach that it already had tequila in it,” Williams said.
Jumping further into malt-based beverages, canned margaritas and successful beer styles may also fuel each other. Corona and Modelo are the nation’s No. 2 and No. 4 beer families in off-premise sales. Consumers might be making a natural shift to a Mexican cocktail from a light Mexican beer.
“They have that kind of that subtle unifier, whether it’s lime or whether it’s a little bit of citrus, or kind of an outdoor flavor to them,” Krueger said.
As beverage companies look to new segments for growth, the Bump Williams team is keeping an eye on non-alcoholic margaritas as well. Craft mocktail brand Recess is already playing in the space with a hemp margarita, and launched a non-CBD margarita mocktail this month. Non-alc agave cocktail line Parch also hit the market last year.
American agave spirit producers might also begin looking for growth with canned cocktails. U.S. sotol producers Marfa Spirits Co and Desert Door have emerged following the rise of mezcal and tequila, and a few California agave spirits have launched in recent years. So far, no American-grown agave cocktails have sprouted up, however.
But America’s thirst for margaritas is not entirely positive for the long-term health of the tequila category, according to Tommy’s Bermejo. Because agave grows slowly, prices are prone to boom and bust cycles. The accelerated demand for agave spirits has put pressure on producer ecosystems in Mexico and led to environmentally taxing production methods, making it harder for smaller suppliers to compete against large companies or celebrity-backed brands, Bermejo said.
“Tequila is a victim of its own success, and it becomes harder and harder for the serious company to continue to grow in a market where, say the owner of a celebrity brand can go to an agave grower who has contracts with established distilleries and offer 10% or 20% more money,” he said. “Because of the success of celebrity tequila there are ripple effects all throughout the industry.”