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| Harvesting agave in Mexico (Bill Dowd photo) |
Americans have a sudden thirst for tequila, and Mexican exporters are struggling to keep up. Booming tequila demand is causing a huge spike in an obscure Mexican commodity -- agave.
Agave, a spiky blue plant that grows in Mexico, is the principal ingredient in tequila as well as mezcal, another liquor that’s grown more popular. As U.S. tequila demand has jumped -- and 80% of Mexican tequila exports go to the U.S. -- agave prices have risen, too. The price has more than quintupled in the past four years ... .
It’s tempting to blame all this on young party animals, tequila’s traditional U.S. base. But surveys suggest baby boomers also are boosting sales. In all, the Distilled Spirits Council of the U.S. (DISCUS) says tequila shipments more than doubled between 2002 and 2016, to nearly 16 million cases. Sales of super-premium tequila have been especially strong.
So why not just make more agave? Agave plants take five years or more to grow to maturity, and many are controlled by the liquor companies. The Mexican government also keeps tight controls, forcing producers to use agave grown in a limited number of municipalities. The rising ingredient costs have hurt producers like Jose Cuervo, whose profits fell 48% in the last quarter even as revenue jumped 52%. In the end, the trend could mostly hurt smaller distillers, who will be less able to absorb the higher cost, according to the RBC analysts. ...
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