BRAND IN TROUBLE: Curing Tequiza's hangover

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Almost two years after its launch, Anheuser-Busch Co.'s Corona-killer, Tequiza, is struggling. Now the marketer is looking to a new agency, a new campaign and increased promotions to fire up sales of the high-end, import-style brand.

At $6.70 per six-pack, (compared with $5.50 for a six-pack of Budweiser and $6.95 for Corona Extra), Tequiza is one of the brewer's most expensive offerings. While the notion of a tequila-flavored beer initially intrigued drinkers, the novelty has worn off as consumers have hopped to new products or retreated to old favorites. Despite the problems, the company remains committed to building the brand, in part because of A-B's desire to beef up its high-end line and provide wholesalers with higher-margin offerings.

Tequiza burst on the scene in February 1999, supported by a $1.2 million ad effort designed to steal sales from the nation's No. 1 import, Corona Extra. A-B figured it would benefit from the tandem popularity of tequila, the country's fastest-growing spirits segment, and the thriving imported-beer category as well as the marketing and distribution heft of the world's largest brewer.

In Tequiza's first year, the brand sold 570,000 barrels, according to Beer Marketer's Insights, a trade publication. As year two rolled around, sales slowed to about half that. Corona sales, meanwhile, rose 27% to 4.9 million barrels in 1999 and likely will see double-digit gains in 2000.While most brands experience a sales drop the year after launch, Tequiza could be in particular trouble, according to observers and distributors. "It's not beer. That's it in a nutshell," said Benj Steinman, associate publisher of Beer Marketer's Insights. He said the steep falloff should be reason for caution. "When a brand declines by that much, you have to wonder what the sustainability is."

Colleen Beckemeyer, director of new products at A-B, said she's not concerned and that Tequiza's problems are similar to other fledgling products. She said A-B believes the brand's growth will outpace that of the overall beer category, which grew just 3% for the 52 weeks ending Nov. 5.

Ms. Beckemeyer said A-B did not have a feel for how far the brand would fall after its debut, but she said she believes it has strong upside potential. "We're just encouraged by the fact that it did stabilize by year-end and that we've seen growth this year. ... The growth this year really was our assurance we should continue to invest in this."

Michael Bellas, chairman of Beverage Marketing, a New York consulting group, said it is too soon to write Tequiza off, especially considering A-B is bankrolling it. "When they say they're going to support something, they do a pretty good job," he said.

A-B spent $1.2 million on measured media for Tequiza in 1999 and $1 million in the first eight months of last year, according to Competitive Media Reporting. Ms. Beckemeyer said spending for year three would be in line with 1999 and 2000. Comparatively, more than $64.3 million in spending the maketeter spent on Budweiser in the first half, according to CMR.

A new ad campaign to give Tequiza a clearer identity will launch in the spring. The brewer is conducting a review for Tequiza that includes incumbent Waylon Advertising, St. Louis (Ad Age Daily, Nov. 29). A decision is expected by the first of the year. Ms. Beckemeyer said it is uncertain if the "Beer Without Borders" tag would remain. No TV is planned for the brand.

"Up until now, we've been very successful with non-traditional advertising-non-traditional for us-print, radio and outdoor," she said, noting promotions would be expanded.

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