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Economics of Tequila

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Economics of Tequila
Final Course Project

Current Economic Conditions (from R1)

Provide an assessment of the current economic conditions and explain how they might affect the sale or production of your product/service.

We are currently in economic expansion.

Demand (First Draft Project)

Identify the most important determinants of demand for your product/service.

Number of Buyers
Tequila is made in Mexico and is prevalent in the Mexican culture. As such, the Hispanic population represents a large part of the consumer base in the United States. Hispanic population growth accounts for ½ of the estimated 27.3 mm population growth since 2000.

Taste
Consumer taste for tequila increased significantly during the last 15 years, spurred in great part by the popularity of luxury brand Patron, introduced and heavily marketed in the late eighties and nineties. Patron was the first luxury tequila brand mass marketed and had the most market share at first; other brands such as Herradura, Don Eduardo, Elconde Azul Blanco followed quickly. Patron has a loyal following in the hip-hop/rap music subculture.

Tequila producers across the board have increased field-marketing efforts in the US in attempt to influence consumer taste. Often this takes the form of educating consumers about the myriad types of tequila and ways it can be consumed (sipped like scotch, etc.). Marketing tequila has shifted subtly away from lifestyle advertising to emphasizing tradition, heritage, and quality.

Income of the consumer
The alcoholic beverage industry is, in general, recession-resistant. However, depending on the economic climate, consumers purchase different types or grades of alcohol. Growth of premium/luxury alcohol brands outpaced the general market last year (up 10% vs. the overall market which was only up 4%). Tequila growth follows these macro trends. Overall sales of tequila in the United States have grown by 47 percent since 2003. During this seven-year period, sales

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