International Report

Tequila is a drink that is unmistakably Mexican, emblematic of the country and the region of Jalisco, in western Mexico. Made from blue agave, this alcohol is highly popular, especially in the United States and Canada. Since the 1990s, its consumption has greatly increased to the point where Mexico now exports 80% of its national production through large brands that have taken advantage of North American economic traits. However, behind these consumption trends lies the ruin of the producers. Located at the end of the chain, they are the ones who experience the crises of the market.

From our correspondent returning from Tequila, the worldwide demand for alcoholic beverages is starting to slow down, while the ultra-industrialized tequila sector is going through a stage of overproduction linked to the specific conditions of agave culture. For months, the plant sold to distilleries has become almost worthless, with prices falling by 98%. While large tequila houses continue to sell bottles and promote the product to tourists, it is the Jalisco producers – known as “agaveros” – who are paying the price.

In the village of Tequila, tourism is the other main activity. Every day, Casa Sauza, like a hundred other factories, opens its doors to visitors. “Of all the agaves you see, only the blue variety can be used to produce tequila,” explains Marisol. “That’s the standard we must adhere to.” Once mature, the heart of the agave, which is used in the production, weighs 30 kilos. “For each ton harvested, the agricultural workers, known as ‘jimador,’ are paid between 15 and 20 euros,” Marisol adds.

The region produces approximately 500 million liters of tequila annually, with a market exceeding 13 billion dollars.

A poor return on investment

At the end of the chain, producers like Saul Martinez sell their plants to large distilleries. Since 2019, he has planted 13,000 agaves, which should earn him between 750 and 1500 euros. “It’s not much,” he laments, and it’s much less than his initial investment. Not to mention the years of work, as the plant takes 6 or 7 years to mature before rotting.

The current overproduction is driving prices down. “It’s all cyclical. Maybe in a few years, the price will be much better. Here, it’s full of agaves,” the producer points out, “I have planted all the way up the hill. The problem is that down below, they plant in excess, set fires, and deforest to plant.”

“It’s the law of supply and demand”

The highly profitable tequila industry attracts speculation and impacts the market’s effects on the producers. “It’s the law of supply and demand,” emphasizes Martin Muñoz Sanchez of the Tequila Regulatory Council, “Many investors have entered the sector without control, and they knew nothing about agave culture. It’s a vicious circle. When prices rise, everyone plants. Then the prices drop, and everyone loses motivation. People stop planting, and it creates another shortage. We will see the impact in 6-7 years. Today, even though it seems illogical, we recommend planting agaves.”

Tequila represents 2% of consumed spirits globally. The sector ensures that the market will continue to grow. Meanwhile, tequila exports continue to increase, mainly to the United States and increasingly to Europe.