Drizly CEO explains why consumers may drink more tequila in 2022

Drizly CEO Cory Rellas joins Yahoo Finance to discuss drink trends to watch in 2022.

Video Transcript

ADAM SHAPIRO: And here's a question for you. Water, vodka, or tequila? I'm not going to tell. Somebody call the FCC. Let's bring in Cory Rellas, Drizly's co-founder and CEO. Because there is data that you folks have about what kinds of spirits those of us who enjoy adult beverages or purchasing worries about champagne. And then you've got breaking news on the vodka tequila war. So where do you want to begin? Let's start with the champagne. Is there a real shortage?

CORY RELLAS: Well there's concerns about a shortage. I think with supply chain issues, we've seen general inflation in the overall category demand remaining really, really high at this time of the year. People celebrating or finding reasons to celebrate. I think there's concerns around a shortage. We haven't seen it as many retailers as maybe comes out in this particular survey. But a 16% increase on a per unit basis for price, which I think leads to some of those inflationary worries.

EMILY MCCORMICK: Cory, this is Emily here. Taking a look at another finding from your survey that Adam was alluding to, looks like next year could be the year that tequila outsells vodka at least on the Drizly platform. What do you think is driving that? And what tends to be the driving factors behind these changes in consumer tastes in alcohol overall?

CORY RELLAS: Sure. This is a fun one. I think from our side of things, e-commerce, especially Drizly has shown to be a bit of a telltale for what's going to come in the particular category. And what we're seeing, both in our survey, and then as well as the Drizly e-commerce data, is that tequila has been rising as a percent of share for spirits overall. And then next year based on the shelf space that retailers are allocating as well as their own data, we could absolutely see tequila overtake vodka for the first time, certainly in our data. But I think in the long term history of the category.

What's been interesting is this is millennial driven. And not only is just tequila growing, it's a premiumization to it as well. And so you're starting to see the Don Julio's, the Clase Azul's do incredibly well in our platform. We expect to see it in the store. And doesn't seem to be slowing anytime soon.

ADAM SHAPIRO: When you say that the beverage trends next year, or that you're tracking more of a quote, "mindful drinking", my generation would say, no, we don't mind if you drink. That would be mindful drinking. But what do you mean by that?

CORY RELLAS: Understood. I might follow the same generation as you, despite the fact that I fall into the millennial bucket. There's a demand for transparency. I think this is very similar to other categories. They want to know where it came from. Where did it originate? Transparency around what are the contents within it. Does it include vegan? Does it include other health like trends? And so all of those coming together, I think millennials demand a little bit more content and a little bit more resonance with the brand that they're purchasing.

All in all, I think it's a very good thing for consumer trends. And I think that health moment within alcohol, whether it be 0%, or products made a certain way is just continuing.

EMILY MCCORMICK: Where are you seeing the most innovation taking place based on the brands that you work with and have observed? Because I think just anecdotally over the past year, I've definitely seen a rise in non-alcoholic beers and spirits, cannabis infused beverages, organic wines? What have you really been seeing in terms of where the innovation has been consolidated?

CORY RELLAS: Well I think last year was all about, how do you launch a brand with celebrity backing? And there's some incredibly successful examples of that. I think this year, we've actually seen a 4 and 1/2 times growth, not percentage. 4 and 1/2 times for ready to drink. The RTD category, which sort of was the growth lever for the industry this year, whereas craft previously, and then also the hard seltzers over the past two years. So I think that's been pretty impressive. They're now in about 4 and 1/2% of our orders.

So if you think about going from less than 1% to 4 and 1/2% in just over a year's time, that's a pretty big development, and again, something we see that still has legs. But it's a dynamic space. And I think the US with the three tiered system has been very interesting to see long tail liquors, high end wines, the craft space, seltzer, a lot of innovation. And I think the retailers are almost trying to play catch up to many of these trends.

ADAM SHAPIRO: Cory, when you talk about the retailers, I'm thinking there are two shops literally within two blocks of where I'm sitting right now. If you had a friend who said, you know what? I think I'm going to open up a brick and mortar adult beverage store, what would you say to that individual?

CORY RELLAS: Well I'd say he better knows what he needs to do there informed by data. But I think this is a very local question. To your point, you might have two shops within a couple blocks of you. There's other states where you may be 3 or 4 miles. And I think you need to have a value proposition that resonates with the particular consumer. E-commerce has knocked down the walls of distance and time and convenience. And so now you need to really resonate on something else. Maybe it's your selection, maybe it's the in-store experience, maybe it's recommendations.

But you need to have a little bit of angle. Because I think e-commerce is going to continue to grow. And the playing field to demonstrate value for the consumer is only going to get more and more as the Drizlys of the world continue to innovate and push the boundaries of what's possible here.

ADAM SHAPIRO: Cory Rellas, Drizly co-founder and CEO. Have a happy holiday and a healthy happy New--