The Flavored Spirits Category Is Headed for $50 Billion. Here Is How to Position Your Brand for the Opportunity.

In early July 2023, Modelo Especial became the best-selling beer in the United States for the second consecutive month, dethroning Bud Light in a way that most industry veterans did not see coming at this pace or permanence. Modelo had an 8.7 percent share of overall beer retail sales for the four weeks ended July 1. Bud Light was at 7 percent and falling.

That is a headline number. But beneath it is a more important one.

IWSR data published the same month showed agave spirits on track to overtake vodka as the category leader by value in the United States in 2023. Tequila's average unit price on Drizly had climbed to $48.60, up from $39.32 in 2019. Volume in agave spirits grew 12 percent in the US from 2021 to 2022 and IWSR projected a volume CAGR of 9 percent through 2027, the strongest sustained growth outlook of any spirits category.

Taken together, these two data points tell the same story: the American consumer's flavor preferences, occasion habits, and identity signals around what they drink have shifted in a direction that is not reversing. And the brands that understand what is actually driving that shift, not just the surface-level trend, are the ones with a real positioning opportunity in front of them.

What Is Actually Driving the Shift

The flavored spirits category's growth is often described as a tequila story or a celebrity story or a Latino demographic story. All of those are partially true. None of them is complete.

The deeper driver is that a generation of legal-age drinkers grew up watching cocktail culture become mainstream, and they came to the category with expectations around flavor, occasion, and identity that vodka was never designed to meet at a premium level. Vodka's value proposition was always about neutrality: it did not intrude, it carried whatever you mixed it with, it was the blank canvas of spirits. That was an asset in a culture oriented around mass-market mixability. It becomes a liability in a culture oriented around craft, provenance, and the story behind the bottle.

Tequila and agave spirits arrived at the right moment with the right attributes. They had terroir. They had production stories with genuine complexity. They had flavor identity that rewarded exploration. And critically, they had celebrity and cultural association that gave younger consumers a reason to choose them that felt authentic rather than manufactured.

The Drizly data confirms that the premiumization story is real and durable even as the broader spirits market normalizes. While vodka's average unit price on Drizly had slipped below 2019 levels by mid-2023, tequila continued to climb. Consumers are not trading down within tequila the way they are within other categories. They are holding their price point or trading up, which is the behavioral signature of a consumer who has made an identity decision about the category, not just a transactional one.

Premiumization Is Moderating, Not Ending

One of the most important nuances in the July 2023 data is the distinction between premiumization slowing and premiumization reversing. They are completely different situations with completely different strategic implications.

The Jefferies de-premiumization tracker showed price/mix moderating across most spirits categories through mid-2023 as post-pandemic normalization continued and inflation pressure squeezed consumer discretionary spending. The WSWA SipSource data showed spirits down 5.1 percent in the first quarter of 2023. Diageo took a price target cut from Citi and Jefferies both, with analysts flagging US inventory levels at historic highs of 1.71x, well above the three-year average of 1.35x.

None of that means the premium trajectory has ended. What it means is that the easy growth phase driven by pandemic-era trading up is over, and what replaces it is a more selective and more earned kind of premium positioning.

IWSR was explicit on this point. Consumers are sticking with their regular brands, buying on promotion or in larger formats rather than trading down to cheaper alternatives. In mature markets, IWSR noted, premiumization looks to be embedded in consumer purchasing behavior, just at slower growth rates. The opportunity is not gone. It is simply less forgiving of brands that were riding the category tailwind without having built genuine consumer relationships.

Tequila is the clearest example of what durable premium looks like in this environment. Premium tequila and agave spirits were the only segment showing consistent positive price/mix alongside positive volume in the June 2023 Jefferies data. Every other major category was either softer on price/mix or weaker on volume or both. The brands that built real positioning in the tequila and agave space over the last five years are now operating from a position of earned strength, not cyclical momentum.

How to Read This as a Founder Building in Flavored Spirits

The flavored spirits opportunity is real, but it has become a much more demanding environment than it was in 2019 or 2020. The following three things are worth understanding before you build anything in this space.

The first is that flavor alone is not a strategy. The explosion of flavored vodkas and flavored whiskeys and flavored tequilas over the last decade produced hundreds of SKUs and very few durable brands. Consumers engage with flavor novelty once and then return to the brands that mean something to them. A new flavor variant gets trial. A brand with a clear identity gets loyalty. The question is not what flavor you are launching. The question is what your brand stands for and whether the flavor you are bringing to market serves that identity or just chases a trend.

The second is that the celebrity association advantage in tequila has largely been priced in. The era of a celebrity-endorsed tequila automatically capturing shelf space and consumer attention on the strength of the name alone is ending. Consumers have seen enough of those launches to be skeptical. What breaks through now is genuine product quality backed by a story that holds up under scrutiny, distributed through channels where the right consumer will actually encounter it.

The third is that the premiumization window is narrowing for undifferentiated product. Wholesale distributor inventories were running at historic peaks in mid-2023, which means the trade has less appetite for new SKUs without a compelling reason to carry them. The brands getting into distribution right now are the ones that arrive with consumer pull already built, not the ones asking distributors to build it for them.

Where the Opportunity Still Lives

None of this means the door is closed. It means it is a different door than it was three years ago.

IWSR projected that India, Mexico, and Brazil would be the primary volume growth drivers for global spirits over the next five years, with the US shifting toward a value-over-volume story. Domestically, the most compelling growth pockets are in the premium and super-premium agave segment, spirits-based RTDs with a credible spirits pedigree, and emerging American whiskey expressions positioned around specific regional or production identity rather than category generics.

The brands that will capture those pockets are not the ones that enter the market with the best marketing campaign. They are the ones that enter with the clearest answer to the most important question any beverage brand has to answer before launch: why does choosing this product say something specific and true about the person who chooses it?

At Liquid Opportunities, the positioning work we do for brands entering the flavored spirits and agave category always starts there, because in a market this crowded and this demanding, that question is not optional. The consumers in this category have been educated. They have seen the launches. They know what manufactured premium feels like versus what earned premium feels like.

The tequila category taught the American consumer how to drink well. The brands that win from here are the ones that give them a new reason to keep doing it.