?? Clase Azul, a famous premium tequila brand, aims to become First Mexican Luxury House

??Today's Shot:?Clase Azul Tequila has a master plan to become the world's?First Mexican Luxury House???

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? What Happened?

Have you ever seen these bottles on the top shelf of your favorite bar?

The hand-painted, ceramic decanters are from Clase Azul, one of the most famous, premium tequila brands in the world.

Founded in 1997 by Arturo Lomeli, the brand has always strived to captivate the world through the magic of Mexican culture.

A few months ago, Arturo presented his "future vision" for the brand.

His framing was shocking to me. It differed from almost every other luxury brand strategy I've ever seen.

Arturo started by explaining the "luxury paradox".

Luxury Paradox:?The more desirable a brand becomes, the more it sells. But the more it sells, the less desirable a brand becomes.

In layman's terms, if Arturo wants Clase Azul to remain desirable, he cannot solely rely on increasing volume to scale revenue for the brand.

Volume must remain constant so scarcity remains high.

Traditionally, luxury brands solve this problem by acquiring other emerging brands in their category and expanding the portfolio horizontally.

For example, Bacardi Limited bought Bombay, Grey Goose, and Patron.

But Arturo doesn't like this playbook.

He wants to build the First Mexican Luxury House.

Instead of acquiring other spirits brands and operating them independently with a centralized back-end, Arturo plans to expand into other "non-spirits" industries.

To start, Clase Azul has launched a few luxury travel experiences under the sub-brand Clase Azul Destinations.

The first, located in Los Cabos, includes Hermes-like boutiques, Michelin-level restaurants, and upscale mixology experiences.

They're also launching hand crafted physical goods/housewares and own two soccer teams.

You can check out a?1 minute video summary?of the Clase Azul strategy here????

???Our Take

I have no idea how I stumbled into the?Clase Azul rabbit hole, but I'm glad I did.

Arturo's strategy pitch video has <500 views on YouTube, but it was full of gems.

I find the topic of brand expansion to be?fascinating.

It's nearly impossible to build a viable luxury brand from scratch.

Selling $10 tequila for $500 at scale is likely a mix of luck, celebrity co-signs, and persistence.

But for the few brands that do reach escape velocity and ascend beyond the "fad line", what happens next?

It seems as though most brands are more worried about "losing what they have"?than?"expanding what they know".

Arturo thoroughly explains this thinking via the Bacardi example.

Bacardi spent 5 decades buying their way into tangential markets without taking any brand risk to the existing mothership.

And while there are surely cost synergies to be had, the newly acquired brands don't get any revenue boost from the existing ones.

Did you know Patron was owned by Bacardi?

Now that you know, do you feel compelled to buy either brand more often?

You don't.

However, if you had the option to stay at a regular Marriott or a Patron-branded hotel, which would you choose?

I'm sure there are some Patron superfans that would find affinity for the Patron hotel.

In principle, the idea of taking a super strong brand and reapplying the IP, purpose, vision, ethos, and design aesthetic across other categories is a good one.

If your true fans are true fans, and you can execute well within other business models,?this approach should work.

The question then becomes, is Clase Azul the right brand to execute on this strategy?

Arturo and his team have dedicated the last 25 years to fusing the terms "Clase Azul" and "premium Mexican culture".?They see them as one and the same.

That type of commitment might be what's required to make a bet like this pay off.

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