Typically made of tequila, Mexican sparkling water brand Topo Chico, and lime, the Ranch Water cocktail has quickly spread from its west Texas origin across the US. The serve was originally the drink of choice for Texan ranchers after a hard day’s work; however, its easy-to-mix and refreshing characteristics mean Ranch Water now has a much broader appeal.
Central to the serve is Topo Chico sparkling water, which has developed a cult status in Texas and other states that border Mexico. As the brand gained traction in the US – driven by the popularity of Ranch Water and a loyal bartender following – soft drinks giant Coca-Cola acquired Topo Chico in 2017, and subsequently ramped up distribution. Towards the end of last year, Coca-Cola launched Topo Chico Hard Seltzer as its first global foray into alcohol, although the product is not marketed as containing tequila.
The growing reach of Ranch Water has been enabled by a host of ancillary trends, most notably: the continued growth of hard seltzers and RTDs; the strong performance of tequila; demand for refreshing cocktails that are easy to make at home; and low-calorie/low-sugar beverages.
Spying the opportunity presented by Ranch Water, in February 2021, Dutch brewer Heineken unveiled a line extension for its Dos Equis lager brand: Dos Equis Ranch Water Hard Seltzer. Then, in March 2021 Diageo acquired Texan producer Far West Spirits, maker of Lone River Ranch Water hard seltzer.
“Lone River captures the magic of Americans’ love for agave flavoured beverages combined with their desire for light, convenient refreshment,” Debra Crew, president of Diageo North America, said at the time. “This acquisition is very much in keeping with our strategy to acquire high growth brands in fast growing categories.”
With the backing of these companies and access to their extensive distribution networks, there is potential for Ranch Water to reach new consumers across the US and perhaps further afield.
For tequila brands, Ranch Water presents an opportunity to demonstrate relevance and ramp up consumer interest. The serve has diversified the ways in which tequila can be enjoyed, which had previously centred largely on Margarita iterations. The low-calorie/low-sugar nature of Ranch Water also reinforces tequila’s ‘better for me’ image in the minds of consumers.
“Because tequila is plant-based, many consumers perceive it to be better for them,” explains Brandy Rand, COO of the Americas at IWSR. “The spirit is seen to be ‘cleaner’ and lighter – especially blancos – with no added sugar and less adulteration. Tequila has become much more associated with the ‘better for me’ movement.”
Innovation more broadly is proving to be a key catalyst for tequila brands to recruit new consumers and prompt drinkers to trade up. Rand adds: “IWSR is seeing a lot of innovation around tequila products, such as tequila and soda canned RTDs, tequila cocktails in bottles/cans, and even infused tequilas – for instance, 21 Seeds, which promotes itself as a tequila for wine drinkers.”
On the more premium end, innovation includes tequilas filtered using the cristalino process, extra age statements, single barrel expressions, Bourbon barrel ageing, 100% organic ingredients, single-estate products, and 110-proof offerings. “Overall, the category is very dynamic and NPD is high,” adds Rand.
The ultra-premium-plus segment (US$45+) of agave-based spirits is fuelling the highest rates of forecasted growth, both by volume and value. IWSR estimates that the agave spirits segment’s CAGR for 2019-2024 will sit at 14.9% by volume and 15% by value in the US. As more consumers enter the tequila category, they are trading up to sipping and more premium variants.
“Not many other categories have as many existing trade-up alternatives, so consumer engagement levels in tequila are incredibly high,” says Rand. “As people explore beyond blanco and Margaritas, they have natural trade up options in reposados and anejos. This is akin to the early boom of US whiskey, where flavoured variants were an entry point to the category for a lot of people, and once they got used to the taste profile, they wanted to try other expressions – often stronger, more pronounced, unflavoured Bourbons.”
The power of social media and celebrity endorsement continues to play a significant role in Tequila’s trajectory. In February, the two elements combined when model and reality TV star Kendall Jenner took to Instagram to unveil her 818 Tequila brand to 152 million followers. From 2018 to 2019, IWSR recorded a 31.7% volume surge of tequilas endorsed by influencers in the US.
You may also be interested in reading:
- Irish Whiskey
- Mixed Drinks
- US Whiskey