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Tequila has been gaining steam with Gen Z consumers as hard seltzer cools off from its previous period of growth. 818 Tequila, founded and owned by model and Kardashian family member Kendall Jenner, is uniquely primed to benefit from the spirit having its industry moment.

818 Spirits — which launched in 2021 with Blanco, Reposado and Añejo varieties — said it has seen stratospheric growth since its debut. Mike Novy, the company’s president and CEO, pointed to Nielsen and IRI data noting that in January, the brand saw 65% growth compared to 9% growth for the overall tequila category, making its growth 7 times greater.

Novy said in an interview the brand’s success indicates the growing preference for spirits as the base for mixed drinks among younger consumers, because of its superior taste profile.

“Without knocking non-spirits based RTDs, I think they don’t come across as authentic and high-quality to consumers as much as spirits-based cocktails do,” Novy said.

According to Novy, 818’s tequila products are available in 13,000 of the 300,000 licensed alcohol sales channels in the U.S., a number it is focused on increasing as its distribution spreads.

Tequila takes charge

Tequila has seen double-digit growth in the category. The surge has helped lead the overall spirits market higher for years. The category, which was worth $16.5 billion in 2023, is projected to grow to $42.5 billion by 2032 at a compound annual growth rate of 11.1%, according to Research and Markets.

The expanding presence of the Mexican agave-based spirit is noticeable on shelves, as leaders in the ready-to-drink category are hoping it can spark a new wave of growth for their brands. The two bestselling hard seltzer brands by volume in the U.S., White Claw and Boston Beer’s Truly, each launched tequila-based hard seltzer products in the last two months.

Tequila soda brand Casa Azul is also benefiting from the trend, touting its lower alcohol content (5% per can) and lower calorie count as selling points. Casa Azul CEO Dennis Carr told Food Dive last month younger consumers are moving away from malt-based drinks and toward spirits because they offer a better-tasting alternative.

The tequila trend comes as many Gen Z consumers report drinking less than previous generations. While some leaders in the beverage space like Constellation Brands reported seeing a loss in spirits sales earlier this year, others like Molson Coors are touting the success they are seeing with premium offerings.

818 strategizes to stand out in the crowded spirits landscape through its novel collaborative products with other trendy brands. In February, the brand launched a collaborative “Pasta Alla Tequila” kit with New York City Italian restaurant staple and Sovos Brands’ pasta sauce giant Rao’s. And last week, 818 launched an espresso martini kit with Chamberlain Coffee — owned by fellow Gen Z influencer Emma Chamberlain — which included a bottle of 818’s tequila and Pecan Cold Brew instant coffee packets. Both kits sold out quickly, with the latter doing so in only four hours according to the coffee brand.

Celebrity status

Consumers and industry analysts agree there is currently an overflow of new celebrity-backed brands in the beverage space. So far in 2024, Robert Downey Jr. launched coffee brand Happy, Woody Harrelson’s Holistic Spirits Company expanded its distribution and Seth Rogen’s lifestyle brand debuted a collaboration with frozen coffee maker Cometeer.

Novy said Jenner coming from a highly successful empire of entrepreneurs gives 818 its “secret sauce.”

When starting the brand, Jenner didn’t want her fame to overshadow the brand or come across as superficial, he said. 818 promotional material focuses on the company’s close relationship with the family-owned farms it sources its agave from in Jalisco, Mexico. The company also achieved B Corp certification last year, which included a partnership to help build infrastructure in agave-growing communities, which Novy said ties into its prioritization of social responsibility as a key facet of its brand.

One added benefit to the company being owned by one of the most famous families in the world: its access to market insights by being in proximity to other brands under the Kardashian empire. Last month, Kylie Jenner entered the alcohol space with her own brand, Sprinter canned vodka soda cocktails.

When asked if 818 has plans to enter the crowded but lucrative ready-to-drink category, Novy said the company has had its eye on the space since its launch. The Kardashian family all co-invest in each other’s businesses, he said, which will give Kendall a window into the logistics of the RTD space through her sister’s venture.

“We’re moving very, very slowly but it would be a logical place for us to go at some point,” Novy said. “We have so much growth left in the U.S. in terms of penetration for our traditional tequila business, that’s important for us to capitalize on.”

Novy said while the company is satisfied with how it is growing, it is only a 40 person team and could use some extra resources in order to expand internationally. According to Novy, 818 is the only brand in the top ten tequilas in the U.S., based on IRI data, that isn’t owned or represented by a large spirits company. The CEO said it would only be interested in M&A activity or investments with large companies if it aligned with its company culture.

818 believes its status as a smaller company frees it from decisions being filtered by gatekeepers at larger conglomerates. Many larger brands in the beverage space can’t engage directly with drinkers because of stringent laws surrounding DTC shipping, according to Novy.

“Because this industry has so many layers and fragmentation and regulations, a lot of companies haven’t quite figured out how to have that relationship,” Novy said.