Ultra-Premium Tequila Is Winning Over Wealthy Americans

Long belittled as a cheap party drink to be downed with lime and salt, tequila has fought hard to rebuild its image in recent years. At its best, it's now recognised as a refined spirit comparable to Cognac or single-malt Scotch. High-end, limited-edition bottles sell for well over $1,000 and it has even become a trendy venture for celebrities, with the likes of George Clooney, Justin Timberlake, and P Diddy all launching their own luxury brands.

The top end of the market is where the strongest growth and biggest profits are found today. While total tequila sales increased by 106 percent across the US from 2002 to 2015, ultra-premium sales grew by a staggering 652 percent in that period, according to the Distilled Spirits Council of the United States. But with every new brand that enters this crowded market the harder it becomes to distinguish between tequilas of genuine quality and not-so-cheap imitations.

With competition intensifying, leading brands are turning to increasingly lavish, experimental creations and even high-tech collaborations in a bid to stand out.

Casa Noble, an ultra-premium brand founded in 1997 by José "Pepe" Hermosillo, just launched a limited-edition extra añejo dubbed Alta Belleza ("highest beauty"), which retails at $1,200 per bottle. Triple distilled, aged for three years in French white oak and finished off with six months in To Kalon cabernet sauvignon barrels, it is limited to just 563 bottles. A single serving at one of the few bars that stocks it will set you back up to $300.

"We wanted to create something special, something with character and punch," Hermosillo tells me at the 27-acre La Cofradía estate where Casa Noble is produced in the town of Tequila. Mango seeds crunch underfoot as we walk past rows of blue agave, cacti, mango, and lime trees to the barrel room, where the inimitable guitar licks of Carlos Santana—Hermosillo's friend and business partner, who was born here in Jalisco state—drift over the sound-system.

Conceived in Hermosillo's so-called "mad scientist" experiments, Alta Belleza is the jewel in Casa Noble's crown as it seeks to place itself at the forefront of the ultra-premium market. "It has a little funkiness from the wine," Hermosillo says of his ruby-coloured invention. "It is a serious spirit. I would recommend you sip it."

Resisting the perverse temptation to down it and lay claim to one of the most expensive tequila shots in history, I take his advice and savour the smooth notes of dark cherry, chocolate, and butterscotch. It is a fine spirit indeed, but is it worth the asking price? That really depends on how deep your pockets are.

Produced using traditional methods on a relatively small scale, Casa Noble's tequilas are organic, kosher, and clean-industry certified, meaning they do not use additives to artificially alter the smell, taste, body, or colour of the spirit, and they treat all their wastewater and recycle all organic waste into compost. Hermosillo hopes these certifications and his painstaking approach to production will help to differentiate his brand from its many competitors.

Tequila Patrón, the ultra-premium market leader, is also searching for new ways to stay ahead of the pack. Founded in 1989, Patrón is distilled using a combination of artisanal techniques and more modern methods at a vast, mock-colonial hacienda in the highlands of Jalisco. Patrón's cheapest tequilas retail at about $50 while high-end products like the Gran Patrón Burdeos añejo go for $650. Some limited-edition offerings cost as much as $7,500.

"For years it was seen as somewhat heretical to charge so much for a tequila, but it's perceived as a very 'in' product right now. If you go to the hottest clubs in the world it's up there in bottle service alongside Champagne and Cognac," Patrón's chief marketing officer Lee Applbaum tells me. "For many years the strategy of the Patrón brand was to create a very aspirational profile focused on swagger and lifestyle. Over time they found a balance between style and substance."

Finding that balance is crucial, as Applbaum says Patrón is now competing with more than 100 ultra-premium brands. "It's very rare that a brand has the substance to back it up," he says. "With a lot of luxury brands when you peel back the onion skin there's not much there. They have very clever marketing but the quality isn't there."

In a bid to secure customer loyalty, Patrón is working with Amazon Echo to create a cocktail lab featuring hundreds of craft cocktail recipes. Amazon's artificial intelligence will not only recommend the ideal cocktail to meet each consumer's needs and preferences, but also help them to plan social events by suggesting music playlists and cuisine to complement any theme. As Applbaum says, "consumers are less likely to jump from brand to brand when they see you as partners in curating their perfect evening."

Patrón has also partnered with Oculus to create an interactive virtual reality experience in which users view the larger of their two distilleries through the eyes of a bee flying from the agave fields to the stately hacienda where the agave is roasted, crushed, fermented, distilled, aged, and finally bottled. Applbaum hopes that showing bartenders and consumers the production process will lead to a greater appreciation for tequila in general and for Patrón's handcrafted products in particular.

Not everyone, however, is thrilled by the state of the ultra-premium tequila market. Robert Denton, a former advertising professional who claims to have created the high-end tequila category, has grown deeply disillusioned by what it has become.

Back when most Americans were only familiar with cheap, hangover-inducing mixto tequilas, Denton began importing Chinaco, the first premium brand to reach the US market, in 1982. After scouring Jalisco for the perfect partners and setup, he then cofounded El Tesoro, another high-end brand, in 1989. "It was one hard sell because it had a retail price of $25 and everything else cost half of that," Denton tells me. "People asked, 'What makes it so much better?' and we just told them: 'You have to taste it.'"

Denton, who is now retired, enjoyed significant success with both brands but he believes today's premium tequilas have tarnished his legacy. No tequila, he says, is worth what the most expensive brands now charge: "It's pure marketing. What can you do to it [to justify that price]?"

The industry began to change for the worse after the passage of NAFTA in 1994, Denton says, after which "Americans started flooding down to Mexico looking for an easy mark. Everybody started going into the tequila business."

With demand outpacing supply, many investors opted to outsource production to distilleries that were already making tequilas for other brands. "All you have to do is get designer packaging and somebody to fill it," Denton says. "There are distilleries that make 20 or 30 brands and every one of them has a different heritage story. That's when lying really replaced marketing."

Raging against the industry, Denton claims certain tasting competitions hand out awards to the highest bidders. He also bemoans the celebrities that launch premium brands but have little or no involvement with their products: "They get a big company to push it for them. They don't do anything."

How, then, can consumers cut through the bullshit and determine which brands are worth their money?

The answer, Applbaum insists, is simple: "At the end of the day, the proof is in the bottle."