How 818 Tequila’s price reduction helped bump up sales

How 818 Tequila’s price reduction helped bump up sales
How 818 Tequila’s price reduction helped bump up sales

At a time when food brands are constantly hiking up prices, 818 Tequila went the opposite route.

The tequila brand, founded by reality TV star Kendall Jenner, reduced its prices last year in a bid to acquire more customers and grow sales. 818 Tequila initially priced its Blanco, Reposado, and Añejo at $45, $55, and $65 per bottle, respectively. But after learning that these prices were out of reach for its target customers, who are in their mid-20s to early 30s, the company decided to quietly cut down the prices last year to $29.99 for the Blanco, $39 for the Reposado and $49 for the Añejo.

The decision to recalibrate its pricing has allowed 818 Tequila to unlock more frequent buyers. The business is poised for triple-digit growth this year, with its best-selling Blanco product already seeing a 94% year-over-year sales increase. Mike Novy, chief operating officer at 818 Tequila, said that the company was able to reduce prices mainly by negotiating its contracts with vendors.

“When we launched, we were obviously very small and we didn’t have leverage to get the best pricing,” Novy said. “Our margin percent was going to shrink but we just wanted the profit dollars to be there through growth.”

818 Tequila was launched in 2021 and has quickly grown its store count to 13,000 doors year to date, which includes retailers like 7-Eleven, Kroger and Total Wine & More. 818 Tequila’s Blanco generates 55% of the business, followed by Reposado at 35% and Añejo at 10%.

Novy said that 818 Tequila’s products initially received positive feedback from customers for its branding and taste. However, for its core customers, many of whom are of average affluence, 818 Tequila was priced above what they considered an everyday purchase. As a result, Novy said many of its customers would purchase 818 Tequila only for special occasions.

“We need to listen to our consumers. They’re literally telling us what they want and we need to give it to them so we repositioned,” Novy said. “Growth has just skyrocketed. It was like we unlocked the door and everyone just flooded in.”

By June of last year, 818 Tequila reduced the prices of all of its products by about $10. The company worked to negotiate the cost of glass, packaging and transportation. The company said it reduced prices without making any changes to the product itself.

Novy said that the company used its growth rates and growing global distribution as leverage for its negotiations. 818 Tequila is now in 24 countries outside the US, including Canada, Australia and China. About 30% to 35% of its business comes from Asia.

Jenner, who is also the brand’s chief creative officer, also has a strong personal brand and social media presence, which helped drive awareness for 818 Tequila. Jenner has a whopping 294 million followers on Instagram alone. “Partners — be it suppliers of glass, paper, retail partners or media partners — they’re willing to bet on us because they think that we’ve got the building blocks to be successful,” Novy said. “[Jenner] “It plays a very important role but in ways that are much deeper than might be obvious.”

Kimberley Ring Allen, founder of Ring Communications and adjunct professor at Suffolk University, said that of the 4Ps of marketing (product, price, place and promotion), price is often the hardest for brands to figure out. Customers have also been particularly wary of spending on pricey food items over the past couple of months as inflation holds steady.

“Customers are most sensitive to price,” Allen said. “It’s a market where celebrity brands are taking over so it’s not just an exclusive thing anymore,” Allen said.

818 Tequila’s Novy said that the brand chose to quietly reduce the prices to avoid any indication that the brand has made any changes to the product itself.

“It’s very important for us that people feel like they are getting a value on a brand that they really respect rather than in any way, shape or form indicating any sort of reduction in value,” Novy said. “It’s the exact same product just now offered at a more affordable price. So we didn’t want anyone to be confused by that.”

 
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