Avion Gives An Inside Look: New Luxury Tequila, Pricing and Marketing Plans

FILED DECEMBER 4, 2013

Dear Client:

Just in time for the holidays, Avion Tequila and Pernod Ricard USA are releasing a new extra anejo expression to the Avion portfolio: Avion Reserva 44. Avion Reserva is aged 43 months in oak barrels along with additional one month aging in petite barrels.

"I've waited and waited to release Avion Reserva 44. Years ago, I reserved specific batches of our tequila to be placed into the Reserva 44 barrels and have closely watched their progression," says Ken Austin, Avion founder and chairman. "This release is the culmination of our bespoke tequila process. Reserva 44 is a spirit that the most demanding of tequila connoisseurs and single malt scotch drinkers will fully appreciate."

In keeping with Avion's philosophy of affordable luxury, the 80-proof product will be available for a suggested retail price of $150 a 750 ml. They will release 744 cases of the tequila worldwide with 150 cases having hit eight select US markets on December 1: New York, California, Florida, Chicago, Texas, Nevada and Georgia.

"The premiumization trend that has been driving spirits growth is strengthening even further at the very high end," Pernod Ricard USA chief Bryan Fry tells WSD. Recall that Pernod has a minority stake in Avion. "Avion is extremely well positioned to enter the luxury arena based on its quality credentials, including being named the world's best tasting tequila by the San Francisco World Spirits Competition and its strong reputation with tastemakers and connoisseurs."

While speaking with Ken about the launch of Avion Reserva in their new office in Manhattan, WSD took the opportunity to catch up on how the entire Avion line is doing. For starters, he tells WSD Avion is up 102% this year after having doubled figures last year.

TAKING PRICING FOR THE FIRST TIME: Avion has not taken pricing since the brand debuted, but they will be taking price in the near future due to the increasing costs of production. "We will without a doubt [raise prices] and we have the courage. There is pricing power with this brand, now that my self-esteem is a little higher and I'm not nervous about the big guys like when we launched," Ken told us.

Part of the rising costs in tequila production is due to a perceived shortage in agave supplies. "Tequila is the new vodka. Tequila is exploding now in parts of the world where they previously sold zero tequila," says Ken, adding that even the East Coast, which was formerly a vodka market, is in the process of shifting to a whiskey and tequila. "It's natural supply and demand. Even if there's not a shortage, the perception that there's going to be a shortage is what's driving up the futures."

The other factor is that competition has raised prices in recent years. "If you look at us on the shelf, our pricing strategy was to be at a certain place, and now there's a greater gap. We're going to close that gap up because we've held out... and because consumers recognize Avion is well worth what they pay for it."

PARTNERING WITH JEEZY: You may recall Avion named Grammy-nominated hip-hop artist Jeezy as Ken's multicultural advisor. The partnership came about after Ken reached out to thank Jeezy for mentioning Avion in one of his songs. These two make an interesting pair, but from the way Ken tells the story they hit it off right away. "We talked about our business, we talked about music, we talked about not becoming a brand of hip-hop, not becoming a brand of the Hispanic world only, not becoming a brand that's just up the middle, but a brand that doesn't discriminate."

For his part of the agreement, Jeezy will give Ken advice on the multicultural community and keep representing Avion as a part of his lifestyle. "We don't want to be too urban, we don't want to be too Hispanic, we don't want to be too Anglo. [Jeezy] gets it all," he says.

GROWING THE RELATIONSHIP WITH PERNOD: Although Avion has been very successful, there is more competition in the tequila space than ever. "It's a dog fight out there," he says. "There's a target on the back of our head every day." For its part, Bryan says Pernod Ricard USA has provided Avion with a powerful route to market as well as its expertise in building leading premium spirits brands. He added that both companies have entrepreneurial spirits and passionate devotion to excellence and creativity, making Avion a good fit.

Such a good fit, in fact, that Pernod chief Pierre Pringuet said in August that they would readily acquire the rest of the Avion brand given the option (see WSD 08-29-2013 ). When asked if he thinks it could be an option in the future Ken said, "Time will tell." He continued: "It's one of those things where Pernod has skin in the game; I appreciate that they put skin in the game and I anticipate they'll have more skin in the game going forward. I'm not in any rush. If it was about money, we could monetize this thing. Pernod said to us, 'What do you want?' And three other companies said 'What do you want?' We could have very easily said, 'Just give us a check and we'll go on our merry way' and it would've changed a lot of peoples lives. We weren't up for that. There's no rush and we'll see what happens."

Where do Ken and Bryan see the brand in five years? They have set their sights on making Avion the number 2 ultra premium tequila in the US. "It's up to us not to screw it up and to stay true to who we are. I want to see Avion get to the dream that I had for it, to always be true and be the liquid that it is, but become a much more mass consumption brand."

WSD BRIEFS:

BROWN-FORMAN GREW SALES BY 6% in its second quarter and 4% for the first half of the year, ended October 31. In the US, underlying sales were up 5%. B-F attributed much of the growth to Jack Daniel's, its super premium stable of whiskey brands, as well as Herradura and El Jimador. Jack Daniel's Tennessee Honey continued to grow double-digits in the US, and Southern Comfort is once again in decline in the US. The company is predicting high single-digit growth in underlying sales for its fiscal 2014.

DELICATO FAMILY VINEYARDS HAS ADDED an Argentinian malbec to the Gnarly Head portfolio. The inaugural 2012 vintage of Gnarly Head Malbec is now available for distribution nationwide for a suggested retail price of $12. It joins Gnarly Head's other offerings including: old vine zinfandel, cabernet sauvignon, merlot, pinot noir, authentic red, authentic white, pinot grigio and chardonnay.

THE HESS COLLECTION HAS NAMED Drew Roberson the company's central division chain manager. He will be based in Texas and report to Brian Batridge, vp/central division manager. For nearly a decade Drew worked as a chain and national account manager for Glazer's in Texas and most recently served as chain account manager for Republic National Distributing in Texas.

Until tomorrow, Emily

"All a skeptic is is someone who hasn't had an experience yet."
-- Jason Hawes

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