How Popular Can Tequila Get?

4/5/2018

How popular is tequila today? Twice in the last year, several brands have sold for more than a billion dollars in revenue. And mezcal, long seen as a niche spirit with limited popularity, is predicted to reach sales of $840 million in the U.S. by the end of 2022. Tequila continues to grow year-over-year as well, climbing from 11.6 million cases sold in the U.S. in 2010 to 15.78 million cases in 2016.

But how sustainable is that growth? Unlike vodka or gin, very specific rules are in place governing what may be considered tequila or mezcal. Only the agave plants from nine particular Mexican states can be used to make mezcal, and only the blue agave plant from five states in Mexico can go into making tequila. 

Demand and (Plant) Growth

The popularity of tequila and mezcal in the U.S. has surged over the last seven years, and that number is important as it represents less time than the eight to ten years it takes for the blue agave plant to reach maturity. Some varietals of agave can take much longer, even decades, before they are ready to harvest. Today’s market demand for tequila and mezcal is limited by how many agave plants farmers decided to plant back when the first Iron Man movie was in theaters.

Over the last several years, prices for agave have spiked, partly due to increased interest in the agave spirits and partly due to a trend of smaller harvests. As Alec Jacobson points out in PUNCH, cycles of boom and bust are nothing new to agave farmers, but this cycle comes amidst unprecedented growth in both the tequila and mezcal categories. 

The situation has left many smaller and lower-cost brands stuck between a piña and a hard place as they race to purchase any and all agave they can find on the open market. Larger distillers, and those that are more forward-thinking and already have existing contracts in place with growers, will likely be unaffected by this surge. But, as Lee Applbaum, chief marketing officer of Patrón Tequila, told Spirits Business, the tequila shortage will have a winnowing effect on the industry, as the smaller and less expensive brands may see their already thin profit margins squeezed dry like so many lime wedges on the edge of a tumbler.

Smoke or Fire?

Predictions of agave shortages are nothing new. In 2016, experts were warning us that a freak snowstorm in Jalisco would devastate future harvests, and that within three to five years we would be beset by a worldwide tequila shortage. The year before, Mexico’s National Committee for Agave Production warned that after 2017, projected agave harvests would be insufficient to meet the needs of producers. As of press time, that dire prediction has not been born out, and both tequila and mezcal production in 2018 has continued to meet soaring demand.

However, there is still a need for vigilance among distillers, and many big names in the industry are moving to protect agave populations now, before any real problems arise. Patrón Tequila committed to protecting agave populations, and is, according to the company website, funding an agricultural study to determine how best to preserve the Weber Blue Agave. Additionally, Patrón creates more than 5,500 tons of fertilizer compost each year from leftover agave fibers, including fibers from 10 other neighboring distilleries, which Patrón takes in and disposes of, free of charge.

In a recent interview with Breakthru, Montelobos Mezcal’s brand ambassador Camille Austin explained the company’s vision for sustainability. “Our founder, Ivan Saldaña, holds a PhD in biochemistry and has a deep understanding and respect for the raw material with which we make our mezcal,” she said. “He created Montelobos on the basis that we would only ever use cultivated and readily available agave varietals in a sustainable way, meaning we will never harvest wild agave varietals and we do not use herbicides or pesticides to grow them. Furthermore, we must always replant several times what we are currently using.” Montelobos also controls 100% of their agave supply,

Montelobos also owns its own palenque in Matatlan, Loma Larga ranch, where their partners, the Lopez family, oversee “acres and acres of organic Espadin that is only used to make Montelobos,” according to Austin. The company is looking for ways to expand their sustainable practices beyond the palenque and has also updated labels for their bottles to be more transparent regarding their process, so as to better inform consumers and empower them to better understand and question the products they buy.

Like Patrón and Montelobos, Sombra Mezcal is committed to using only organically grown agave, encouraging farmers to adopt more sustainable agricultural techniques, and to donating 1% of all sales to environmental charities worldwide. The move toward sustainable agave farming is gaining with other growers as, such as Altos Tequila, who compost their own leftover agave fibers for use in growing their own agave.

In addition to sustainable farming, many conservationists are working to protect the wild agave populations which make mezcal possible. As far back as at least 2001, the Environmental Studies Group (GEA) was working with rural mezcal producers to protect wild agave. GEA biologist Catarina Illsley said of mezcal producers at the time “they have seen that wild agave is disappearing right before their eyes.” That was 17 years ago, and today more and more distillers are committing to practice sustainable harvesting techniques, such as the “three-to-one” rule followed by Mezcal Vago, meaning they will plant three agave for each one they harvest, thus protecting the future of the wild agave population.

Parting Shot

We have no reason to think that the tequila and mezcal categories are in any danger. Voices of concern have heralded doom for the categories for years, but all we have seen so far is unchecked growth in demand. Tequila and mezcal are still evolving categories, and we are still figuring out what it means for these artisanal spirits when production is scaled up as it is now. The one unavoidable truth in the matter is, of course, that consumer demand for tequila and mezcal will continue to grow. As consumers become better educated about the high-quality spirits in the categories and bartenders continue to incorporate them into high-end cocktails, there will always be a demand for these spirits. 
 
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