Tito’s Vodka, No Longer a Scrappy Upstart
As the company’s founder finds himself on Forbes’s list of billionaires for the first time, the brand continues to blow up.
The best-selling liquor brand in the U.S. doesn’t have decades of heritage behind it. It doesn’t come with a name that conjures images of grandpappy sipping it on the porch, or migrants bringing the family recipe as they enter at Ellis Island. It doesn’t have celebrity spokespeople touting it on television ads. In fact, it doesn’t run TV ads at all. It was started in 1997, distilling vodka in sixteen pots in Austin, and its owner is the latest Texan to crack Forbes’s annual list of billionaires.
Tito’s Vodka topped the list of the best-selling liquor brands in the U.S. for the first time this year, according to Wine and Spirits Daily. The jump, according to the industry publication’s reporting, came as Tito’s sales grew by 44%, reaching $190 million between the third quarters of 2016 and 2017. Jack Daniel’s Black Label, meanwhile, saw growth of just 2.2%, coming in with $178 million, while Smirnoff’s 1.1% dropoff put it at $173 million. Tito’s, the only independently-owned liquor brand on the list of the top forty, certainly had a lot more room to grow than the conglomerates (and the sales of Brown-Forman and Diageo, the companies that own Jack Daniels and Smirnoff, respectively, certainly outpace Tito’s when considering all of the brands they distribute). Nonetheless, it’s a remarkable story, given owner Bert “Tito” Beveridge’s humble—and recent—origin in the business.
Forbes estimates Beveridge’s net worth at $2.5 billion, which makes him the thirtieth richest person in Texas. That’s a huge number, although if the folks at the top of the list—Walmart heiress Alice Walton ($38.2 billion) or Michael Dell ($23.2 billion)—woke up tomorrow with Beveridge’s fortune, their employees might consider outfitting the skyscraper windows with plexiglass. Still, it places Beveridge alongside a slew of famous names: His fortune is in a range similar to that of H. Ross Perot, Sr. ($4.1 billion), Texans owner Bob McNair ($3.8 billion), reality television star Tilman Fertitta ($3.5 billion), Mavericks owner Mark Cuban ($3.3 billion), and H. Ross Perot, Jr. ($2.1 billion). (It also makes Beveridge the third-richest person in Austin, behind Dell and Vista Equity founder Robert Smith.)
Tito’s recent rise as a powerhouse brand begs the question: If it’s the best-selling liquor brand in the U.S., and the only one that’s not a subsidiary of a giant corporate spirits conglomerate, how would you estimate the actual valuation of Beveridge’s beverage?
There’s a formula we can use to calculate that, and it leads to a fairly staggering number. Tito’s isn’t for sale, but a company looking to make an acquisition would probably look at a sale price somewhere in the neighborhood of $5.8 billion—a billion dollars more than the value of, say, the Dallas Cowboys.
We’re basing that back-of-a-napkin valuation on the sale price of local competitor Deep Eddy Vodka, which sold in 2015 to a Kentucky distributor for $400 million. Deep Eddy, at the time of the sale, was shipping 330,000 cases of vodka a year, the measurement by which liquor brand values tend to be assessed. That’s good for a rate of around $1,200 per case. Tito’s, meanwhile, is estimated to be shipping 58 million bottles next year, or more than 4.8 million cases. At the same price that Deep Eddy commanded, that’d be $5.8 billion. And that assumes that Tito’s, as the hottest brand on the liquor block, couldn’t command an even higher premium if Beveridge decided he wanted to cash out.
All of which is to say that the Tito’s story, which was already compelling, has only grown more interesting as the company’s gone from “scrappy upstart” to “the biggest brand in its field.”