Patrón's discontinued XO Café expression.

Tequila's Coffee Break

28 June, 2022

With Patrón discontinuing its popular XO Café, the tequila liqueur category has opened up to other brands – and it’s a popular space, finds Shay Waterworth.

The industry was left scratching its figurative head in late 2021 when Patrón discontinued its much-loved XO Café expression. The coffee liqueur had become a popular shot among the global bar trade, so when the news broke of its redundancy it made headlines in both trade and consumer titles. 

XO Café was no new phenomenon. The expression launched in 1992 and steadily built a following over the subsequent 20 years until Bacardí, which bought the brand in 2018, decided to cease production. Explaining the decision, Patrón president and chief operating officer Mauricio Vergara told The Grocer magazine that the company wanted to focus “on growing and protecting production and supply of our core super and ultra-premium tequilas”.

This means with XO Café now a thing of the past, bar the remaining handful of bottles selling online for £100+, several brands are poised to fill the Patrónshaped void in the market. 

Premium tequila brand Cazcabel launched its own coffee liqueur in 2014 as one of three flavoured tequilas in its range. The timeline would suggest the product was brought in as competition to Patrón but, having positioned itself very much in the same market space, Cazcabel Coffee has taken a lot of the distribution left vacant. 

Lucy Cottrell, Cazcabel marketing manager, tells Drinks International: “We weren’t necessarily celebrating Bacardi’s decision, because ultimately good competition is what drives the market. But for sure our distribution in the UK has benefited and we’ve won a lot of the outlets left by Patrón. Sainsbury’s [one of the UK’s major supermarket chains] was specifically asking for a tequila coffee liqueur.” 

Overall Cazcabel has taken 95% of Patrón’s UK distribution space which was dedicated to XO Café and Cottrell says Cazcabel Coffee has grown 410% in the UK so far this year and tripled its Australian outlets, making it the brand’s second bestselling product behind its Blanco expression. 

Sierra Milenario Café is also looking to capitalise on the recently exposed market. Owned by German spirits company Borco and launched two years after Cazcabel’s expression, the brand has its own distribution power behind it, which could open many markets. 

“As one of Europe’s leading spirits companies and experts in producing exceptional tequila, we have always been driven by innovative thinking, pioneering in the category with new products,” says Nikolas Odinius, communication manager. 

“This tequila liqueur has thus been produced to further explore the possible flavour profiles of tequila and support our reputation as one of the market leaders in the tequila category in many countries around the globe.” 

MARGINAL GAINS 

One of the theories behind Patrón XO Café’s discontinuation is the slender profit margins under which it was operating. When you take Patrón’s existing premium blanco tequila and blend it with other ingredients before selling it at a lower price point it’s easy to understand these difficulties, although other brands appear to be maintaining strong margins. 

Vivir tequila launched Café VS at almost exactly the same time that Patrón announced the news of its withdrawal from the market and co-founder Nav Grewal insists the coffee liqueur is bringing in solid numbers. 

“Margins are in line with the rest of the products in the range,” says Grewal. “Considerable time was put in in order to create our own unique flavour profile that wasn’t just copying Patrón XO. We use Mexican coffee beans and local sugarcane piloncillo. We also want to ensure our price is competitive in the long term and reflective of our brand positioning rather than profiteering in the short term.” 

As well as Vivir, other producers are looking long term when it comes to sales strategies and in fact the strong performance in sales isn’t necessarily the only positive which coffee liqueurs offer. 

“Our coffee liqueur definitely acts as a gateway product to the rest of our tequilas,” says Cazcabel’s Cottrell. “It’s a very accessible product so for those consumers who’re convinced they don’t like tequila this is one way of changing their perceptions before inviting them to trade up to our more premium tequilas.” 

SIMPLE SERVE? 

Ben Alcock, owner of Filthy XIII and Her Majesty’s Secret Service bars in Bristol, mourned the loss of Patrón XO Café late last year because it was such a popular choice with his customers. According to Alcock, bartenders enjoyed serving the product ice cold straight out of the freezer, and while some good brands are in the market, there’s still room for improvement. In fact, he says that on one occasion he took a bottle (unnamed) out to pour shots and the entire thing had frozen solid. 

Vivir’s Grewel adds: “We often find bars keeping it in the fridge/freezer as they still get requests for coffee tequila shots, but this also doesn’t stop them using it in cocktails too. Tequila is a unique spirit that crosses multiple drinking habits – cocktails, sipping and shooting. Ultimately if people are out to have a good time they will no doubt have a few rounds of shots in the evening and coffee tequila is a very popular choice.” 

However, Borco’s Odinius insists Sierra Milenario is actually targeting longer serves rather than just relying on shots to increase volume. “Sierra Milenario Café has been crafted to be enjoyed neat like whisky or Cognac or in cocktail serves,” he says. “Coffee beans from the well known Chiapas Maya jungle and vanilla from the heart of Mexico’s prime vanilla growing region Veracruz are blended with 100% de agave blanco tequila. With its high-profile ingredients and diverse flavour profile it is perfect for after-dinner drinks.” 

Vivir’s Grewal adds: “As consumers are becoming more aware of tequila and how to drink it, tequila coffee expressions are going to become increasingly in demand – especially good-quality, responsibly-produced ones. We’re already seeing many non tequila coffee liqueurs trying to push themselves into the Patrón XO gap. However, the one thing they’re missing is that they aren’t tequila coffee liqueurs. That’s what consumers want and the flavour profile that tequila and coffee makes is unique. 

“Initially tequila was seen as just a shot and coffee a great flavour that made it easier to drink, as consumers didn’t have the taste for tequila. Now we’re seeing tequila grow in its own right and consumers drinking it in cocktails, neat and in long drinks as well as shots. So, we see the growth potential beyond just shots now for our coffee tequila as the drinking occasion for tequila has matured.” 

While the race to fill the void left by Patrón XO Café is still one lap into a 5,000m running event, brands are capitalising on the shooting culture which tequila coffee liqueurs thrive under, while planning for long-term growth. Possibly the key issue in the future will be convincing consumers to use them in cocktails over other coffee-based liqueurs and not just reserving them for shots, otherwise the market could have an upper limit. 





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