Patrón plans to spread its wings
Published: 27 August, 2008
When the founder of the Patrón Spirits Company, John Paul DeJoria, made his first batch of 1,000 cases of ultra-premium tequila in 1989, there was a particular vision that it would become a global luxury brand that would alter consumers' perceptions of Mexico's native spirit. He was happy to give spare bottles away to his celebrity friends if it didn't work out as a business.
Eighteen years down the line, the Las Vegas-based company he co-founded with Martin Crowley is selling 1.5 million cases of tequila, and seeing annual sales of its Citró nge and XO Café liqueurs double, while the Pyrat ultra-premium rum brand is one of the best sellers in the States in the over-US$25 category.
Now extending into the lucrative vodka territory, the company announced its purchase of the global distribution rights to the ultra-premium Ultimat brand portfolio in October.
Chief operating officer John McDonnell admits that 95 per cent of the company's tequila sales are in the US market, but that's changing rapidly.
Two years ago, the Caribbean islands of St Maarten and St Thomas were Patrón's only export markets. Now, its tequila is sold in more than 60 countries and new distributors are signing up at a considerable pace.
The tequila is backed by a global ad campaign that uses local market twists on the same theme of "simply perfect", and links with high-profile events such as the Korean version of the Oscars. In the US, DeJoria's contacts book helped Patrón get into the hands of Clint Eastwood, Peter Fonda and Dan Aykroyd.
Overseas distributors range from the big-hitting Brown-Forman in Taiwan to the niche Brinkman Beverages in Ireland. McDonnell says distributor philosophy matters more than size.
"We look for people to work with who know the luxury spirits market and are used to dealing with the right accounts and doing high-end promotions in hotels, restaurants and bars," says McDonnell.
The reasoning behind this DI profile is that Patrón isn't a tequila just for slamming , but for sipping on the rocks or putting into cocktails - serves that McDonnell estimates account for roughly a 50-50 split in the brand's consumption.
That's not too surprising for a brand that models itself as the "Dom Perignon of tequila" and sells for just short of £50 in the UK, with comparable prices in other markets. The tequila is made with only the highest-priced Weber's Blue agave and hand-packed in a hand-blown bottle, decked out with natural cork and ribbons. The "super ultra-premium" Gran Patrón Platinum comes in a "violin-quality, curly maplewood box".
Many other spirit firms would be happy to save on the costs and build in a little more margin.
"We're privately-owned, and we choose to focus on quality not quantity," says McDonnell. "We can control how we get to market, but when you're publicly-owned you've got to answer to shareholders."
In the short time Patrón has had a European presence, Ireland and Greece have been particular success stories, buoyed by the high numbers of American tourists visiting those countries.
"We're very pleased with the growth we've experienced in Canada and the international cruise ship business has been extremely surprising," says McDonnell. "Pyrat rum has really had a lot of support on menus in that market."
One of the biggest successes has come in World Duty Free at UK airports, where there's been a year-long rolling promotional campaign.
McDonnell adds: "We launched in Japan earlier this year. It's a key market for us because it's all about high-end space and we're investing a lot of time in that market." Hong Kong and Singapore are other focus markets in the Far East.
Latin American business is concentrated on the central region, with Costa Rica "the shining success". He adds: "We're gradually expanding out into Panama, Nicaragua and Honduras."
The Mexican market itself is confined to a couple of small towns. "It's all about finding the right partners for distribution. We're not going to go to the market for the sake of ticking a box, but we're doing extremely well in duty-free on the Mexico-US border."
And still to come? "We haven't scratched the surface in the Middle East or eastern Europe just yet. The next big one I'd like to get into is Russia, which is a huge opportunity, and we're looking to increase our activity in Korea. Those would be the big two we're looking at."
Looks like the celebrities will find the freebies a little harder to come by in the future.
=== John McDonnell CV ===
2002-present: chief operating officer, Patrón Spirits Company
1983-2001: various roles at Seagram including general manager for Taiwan and vice-president of sales for Europe, Africa and the Middle East
1979-1983: degree in marketing at Suffolk University, Boston, Massachusetts