Seeking to Expand Clase Azul's Billion-Dollar Tequila Empire Beyond the Premium Market
Seeking to Expand Clase Azul's Billion-Dollar Tequila Empire Beyond the Premium Market
Inside his contemporary home nestled in Guadalajara, Mexico's hills, Arturo Lomeli is tucking into a beloved meal—taquitos heaped with crema, salsa, and guacamole—while crystal flutes filled with his renowned Clase Azul tequila get passed around the table. The iconic blue-and-white hand-painted ceramic bottles that have made his brand famous are scattered around the room.
Next, dark-toned mezcals in decanters—black, red, or teal—take center stage. And then, there are the special edition anejo tequilas, adorned with artisanal work from Mexican artists. To the right of the groaning lunch table, Lomeli, 52, begins to retrieve more bottles from his bar, where a large surrealist-style portrait of Clase Azul's founder and CEO with a bird on his shoulder keeps watch over his personal collection.
"I was chosen to protect this spiritual essence. I am the guardian. A Mexican messenger," says Lomeli, as the exquisite $1,500 Dia De Los Muertos collection 2024 release—in a purple bottle boasting a metal skeleton playing an accordion—makes its way around the table, bypassing Lomeli himself. He has given up drinking in recent years, he explains, aiming to live beyond 100.
Nevertheless, he continues to lead his super-premium tequila brand, which is exported to 92 countries worldwide. Over the past three decades, Lomeli has fine-tuned a strategy that thrives on authenticity—from the distillation process to keeping the business firmly Mexican-owned. He takes a long-term approach and invests heavily, even in seemingly illogical areas.
For example, the newest addition to his expansive bottling plant in Jalisco, Mexico, is a box-making facility that churns out custom packaging at breakneck speeds; 18,000 sheets per hour, to be precise. Clase Azul even manufactures its own metal bottle caps at a rate of 476 caps per hour. His deep-dive approach has turned Clase Azul into one of the hottest tequila brands ever sold.
"They've carved out a unique niche. Arturo's got a vision that differs vastly from all other tequila brands," says Wayne Chaplin, CEO of Southern Glazer, which has handled Clase Azul's distribution for two decades. "Sometimes, people are eager to sell more, faster. But Arturo won't compromise the luxury aspirations of his brand to secure extra sales."
Experts in the food industry suggest that if Clase Azul were ever to sell, the deal would be worth billions. This speaks to the astronomical multiples at which spirits are currently traded, as well as the strength of Lomeli's business. Clase Azul remains tight-lipped about its financial details. Estimating annual revenue of $150 million, Clase Azul surpasses the sales Casamigos had when it was sold to Diageo in 2017 for $1 billion, or 10 times the revenue.
Our Website suggests Clase Azul could be worth over $1.5 billion. Utilizing a multiple of 10 times sales—a typical, albeit lower, market standard for a tequila brand—this estimate is conservative compared to other recent spirits acquisitions. For instance, Bacardi acquired Patron in 2018 at 8 times sales for a total of $5.1 billion. In 2022, Dwayne "The Rock" Johnson's Teremana tequila sold a minority stake to Jägermeister in a deal appraised as high as $4 billion, or a staggering 25 times estimated sales. Such high valuations reflect the profitability of these spirits brands, too.
Clase Azul's estimated net income margins are estimated to be above 30%, and gross margins approach 70%. Even publicly traded spirits conglomerates—like Constellation Brands, which owns Svedka and tequilas Casa Noble and Mi Casa, or Diageo, with Don Julio tequila, Johnnie Walker, and Smirnoff—struggle to meet these benchmarks.
However, an acquisition or public offering is unlikely in the short term, as Lomeli reaffirms Clase Azul's independence and commitment to staying 100% Mexican-owned. Lomeli, who holds the majority stake in the brand, partners with his brother-in-law Juan Sanchez, a financial advisor and entrepreneur based in San Francisco, who joined the team full-time in 2003.
Lomeli and Sanchez have built Clase Azul through a mix of small business loans and resilience, and they have no intention of altering their strategy anytime soon. "We're not in a rush," Lomeli concludes.
"Detachment is crucial," Lomeli emphasizes in his business philosophy. "If you are attached to something and it vanishes beyond your control, you'll endure suffering."
Lomeli clarifies that he is attached to the aspects he can control, such as his feelings, reactions, thought process, self-discipline, and determination.
The emblem of stoicism was a hard-earned lesson for him. Though Lomeli continues to serve La Pinta at his residence. This enlightenment led him to envision a luxury brand of Mexican-crafted ceramics as a unique selling point for his tequila business.
Clase Azul's reposado, the first bottles of which were introduced in 2000 with 58 cases, nearly faced downfall. An importer in San Diego attempted to deceive Lomeli, who was still learning English, into relinquishing all U.S. rights. However, Lomeli fortunately averted this deceit by seeking advice from Sanchez.
To secure financing during the initial years, Sanchez advised Lomeli to prioritize profitability. This strategy elongated the process of establishing the consumer brand but enabled Lomeli to preserve his equity without yielding shares to outside investors.
As expressed by Sanchez, "Being independent and private, despite the arduous journey, grants more control." Many might perceive it as an overnight success story, but the reality is nearly 28 years of strenuous labor and suffering.
Results started emerging after Sanchez was fully integrated into the team to focus on the U.S. market. Postponement for 18 months led to amassing an importer's license, and eventually, Clase Azul was present in 100 of the top restaurants and bars in the area. Southern Glazer assumed distribution in 2005, resulting in a tripling of sales within six months, making America a primary focus.
Lomeli relocated to San Diego for four years because of America's importance. However, an investment offer failed to materialize, causing over-extension with excessive inventory and insufficient cash. Lomeli had to return to Guadalajara to bring the business back to solvency.
Expansion emerged again by 2013, leading to Lomeli's next relocation—this time to New York City, an underperforming market despite Southern being one of its biggest. With close to 1,000 tastings, cases of Clase Azul started selling out. Lomeli seized the opportunity to sever ties with Southern in New York after some deliberation and built his own salesforce.
Lomeli comments, "We prioritize longevity. Confront your fears to evolve yourself."
According to Lomeli, revenue surpassed $55 million by 2019, and an offer to purchase the company for $1 billion arose. They declined, deeming it inauthentic.
Since then, numerous investment offers have been rejected, and they also considered transforming Casa Tradicion into a conglomerate, incorporating vodka and other spirits. However, they decided only to sell what aligned with their cultural roots.
As Clase Azul expanded, significant investment in infrastructure was undertaken; a bottling factory was established in Jalisco in 2022, with the capacity to produce 150,000 bottles per month. While elevating quality, Clase Azul doubled down on exclusivity, producing editions as few as 10 bottles.
Tequila has experienced an up-and-down ride. In 2022, it was America's fastest-growing major spirits category, with double-digit growth or more among super-premium brands. Nevertheless, a recent lull is observed. Projections suggested the market would grow 44%, but it only spiked 4%. Subsequently, a tequila factory and ceramics-making facility were shuttered.
"Growing at triple-digit rates created a growth machine that was highly stressful," shares Lomeli. He occasionally works from his hyperbaric oxygen therapy chamber at home and plans to construct a spa, potentially his last reincarnation. "Successful individuals are not the ones with more money, but the ones with enough. So the question becomes, when is enough?"
Lomeli has turned The Loft, an unlisted establishment in downtown Brooklyn, into a center for building a loyal community through exclusive tasting events and premium customer services. On one recent evening in December, The Loft was thronged with about 30 collectors who had pre-ordered a trio of special edition bottles from Clase Azul's Master Artisan collection for $22,500 without tasting a single drop.
As the skilled artisans Fernando Jimón and Mariá Elena Lo Pérez, masters of the fading Mexican craft of barro bandera (or "colorful clay flags"), displayed their inventive designs and influences, the patrons delighted in their first taste of tequila. A green bottle presented the Mexican folklore of nahuales, shape-shifting humans transformed into felines, as the tequila inside had aged eight years in American whiskey casks before maturing further in Tuscan barrels. The tequila housed within a red bottle, adorned with a moon-like end, had journeyed through Bordeaux wine barrels. Lastly, a white decanter, inspired by Mexico's flag and embodying an eagle, boasted tequila aged in fortified wine barrels from Bombarral, Portugal.
Serial entrepreneur Ronak Patel, who dropped approximately $26,700 on the night's entire assortment, along with two additional bottles from Clase Azul's breast cancer awareness collection, declared, "This is the Porsche of tequila." He anticipates its value to escalate and commends the initiative in fostering an appreciation for the artists' craftwork.
This latest phase in Lomeli's strategy consists of expanding Clase Azul beyond The Loft in Brooklyn, to include properties in Tokyo, Japan, and Los Cabos, Mexico, established in 2022. La Terraza, offering a high-end eatery, bar, and boutique, debuted in 2022, showcasing exclusive tequilas only sold at these locations. The plan includes opening a distillery, La Hacienda, in Jalisco the following year, for esteemed patrons to immerse themselves in special experiences.
Lomeli explains, "You have much more control" and are no longer reliant on external entities that could jeopardize your success.
By establishing a strong community, Lomeli envisions Clase Azul as the first Mexican luxury brand. Beyond tequila, he intends to venture into ceramics and other ventures. Lomeli envisions a Mexican-style beer or wine, or an array of luxury lodgings across Mexico, akin to Nobu's expansion.
Lomeli aspires to promote Mexican culture globally, as his objective. "That's the biggest dream," he remarks. "It aligns perfectly with our purpose to exist – to captivate the world with the allure of Mexican magic."
Lomeli is driven by patience, a crucial component of the luxury industry. "The luxury industry demands something else," Lomeli mentions. "The other pillar is patience."
- Arturo Lomeli, the Clase Azul founder and CEO, geraldingly retrieves more crystal flutes filled with his renowned Clase Azul tequila from his bar, where a large surrealist-style portrait of him with a bird on his shoulder keeps watch over his personal collection.
- Clase Azul's Dia De Los Muertos collection, a special edition anejo tequila adorned with artisanal work from Mexican artists, is a highly-prized item, with experts estimating that if Clase Azul were ever to sell, the deal would be worth billions.
- Wayne Chaplin, CEO of Southern Glazer, which has handled Clase Azul's distribution for two decades, admires Lomeli's approach to the luxury tequila market, commenting, "Arturo won't compromise the luxury aspirations of his brand to secure extra sales."
- Clase Azul's newly-built box-making facility in Jalisco, Mexico, is a testament to Lomeli's deep-dive approach, churning out custom packaging at breakneck speeds while manufacturing its own metal bottle caps at a rate of 476 caps per hour.
- Lomeli's vision for Clase Azul extends beyond tequila, with plans to venture into other areas of luxury, such as Mexican-style beer or wine, and establish luxury lodgings across Mexico, akin to Nobu's expansion, in order to promote Mexican culture globally.