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Talk tequila:Join the discussion forum to ask questions, make comments, vote in polls, rate your favourite tequilas or simply meet other tequila aficionados.
Tequila sips:Despite a glut of agave in 2007 and record low prices, we're paying today for tequila that was started at least eight years ago, possibly longer. The glut today doesn't affect agave prices 8-10 years ago. Plus over those years other costs have risen: wages have risen, fuel and electricity costs have risen... and the cost to make a single bottle of tequila from agaves planted back then has not gone down as a result of today's glut.
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Updated May 2011 |
What the Future Holds for Tequila"A computer lets you make more mistakes faster than any invention in human history - with the possible exceptions of handguns and tequila." Mitch Ratcliffe
Tequila's growth seems like another gold rush for those entrepreneurs who are looking for new markets to invest in. There are millions of ripening agave in the fields. With global sales rising rapidly, especially in the USA, tequila's future seems assured.
But is it?
Many of the 110 producers do not own their own plant for making tequila, and instead use existing facilities for production. Fewer than that have their own agave fields: many buy from farmers, so production is dependent on available plants, and price.
According to the CRT's most recent inventory of agave plants, the number of new plants going into the ground in all regions since 2000 was rapidly dwindling:
right now there's a huge glut of agave, and prices for agave have fallen so low that some independent farmers don't bother harvesting it: it costs more to get it our of the field than they will get from a producer. This author witnessed agave fields in 2007 that had been burned or ploughed under for other crops. I suspect that unless prices rise very soon, more and more fields will remain fallow or be reclaimed for other crops. In the meantime, fewer farmers are planting right now, so any shortage - and its associated crisis - will start to make itself known around 2010-2012 when the available crop will not meet the demand.
A story in Milenio, from late 2006, suggested as much as 360 million tonnes of excess agave could be at risk of being wasted because it didn't have buyers. In 2005, the National Chamber of the Tequila Industry (CNIT), purchased 75,000 tonnes of agave from farmers without contracts to producers.
During any agave shortage, prices rise, and mixtos often take precedence over 100% production because it stretches the available agave supply further. And a shortage IS coming, probably as early as 2010, but maybe as late as 2012.
In 2006, the federal agriculture secretariat (Segarpa) provided 59 million pesos in compensation for farmers hoarding low-value agave. Even with the help from Segarpa, the glut is expected to last until at least 2009, according to the Jalisco Rural Development Secretariat.
This of course on affects independent growers, not the producers who already own their own agave plantations. Those at risk from any future agave shortage are those who depend on these independent growers.
In 2006, more than 228 million litres of tequila were produced. Of that, about one third - 77.75 million litres - were 100% agave. The mixto market continued to dominate production and sales. But this pattern looked like it was changing. In the first quarter of 2007, 83.45 million litres were produced, of which 39.01 million were 100% agave, or about 46.7% of total production.
David Agren wrote, Several factors, both intentional and serendipitous, have propelled premium tequila’s popularity. According to Bertha Becerra, spokeswoman for the Guadalajara-based Tequila Regulatory Council (CRT), manufacturers began distilling better beverages, investing in new technologies and improving production techniques. Firms also marketed their products more effectively, leveraging tequila’s appellation of origin distinction, which imbues it with a certain cachet – similar to luxury drinks like cognac and champagne.
Start up companies will be hard-pressed to compete without a significant bankroll. Partida, for example, hit the market with a $20 million promotional campaign launch. Patron swept through the market with a powerful marketing campaign that rocketed it from unknown in 1989 to the envious number one position in premium 100% tequilas in the USA (accounting for more than 70% of ultra-premium tequila sales in the USA).
The 'blue gold rush' that has drawn so many entrepreneurs to produce new tequilas in the past five years eventually has to have consequences in the market. There will be a product fallout: there simply isn't enough shelf space for everyone. Not every company can compete and survive, and when the next agave shortage arrives, many of these newcomers will be seriously challenged to continue.
Some people ask: can all these tequilas survive in such a competitive market? Is there room for another product? When will the bubble burst? Soon, I suspect. In late 2010, there were roughly 1,200 brands of tequila registered, many of the newcomers competing for the upscale, premium market niche.
While no one can predict the mood of the consumer, nor the sudden swings from one product loyalty to the next, producers might take heart by examining the single malt scotch market. There are about 120-125 whisky producers in Scotland alone (plus other producers in Ireland and Japan), with three or more times the number of brands. Yet the single malt market seems not to suffer from this crowding and indeed has grown over the past decade. In fact, 2006 was a record year for Scotch whisky, with more than 1 billion bottles exported.
Tequila's growing international popularity poses another threat. Tequila is an ethnic product, but that identity is in danger of being bleached by globalization. While tequila is protected from becoming a generic term, its familial relation with Mexico may be weakened, as it gets adopted by aficionados in distant lands, and as more outsiders get involved in the production. How truly Mexican are tequilas made and promoted by international corporations or by American businessmen, no matter how passionate they feel about their products? Will the consumer of these products give loyalty to the company or the land where it was made?
The addition of extra añejo as a category should have a positive effect on the perception of tequila as a premium product because the popular perception is that age conveys status. Not only will the prices be higher for these well-aged products, but they will be positioned with other similarly aged - and named - spirits.
The Mystery of Chinaco® Negro is in the marvelous complexity and deep, alluring colors of this rare, 5 year old 100% Agave Añejo Tequila. Lost in the cellars of the Chinaco Distillery were 12 casks of aging Tequila, 7 of which were chosen by Master Distiller German Gonzales as worthy of the distinction: CHINACO® NEGRO. Each bottle represents an individual cask selection, and this extraordinary 5 year old is labeled with the unique lot 15 and is signed by German Gonzales. Collect the entire series and unravel the mystery!
Clase Azul Ultra is the latest offering from Mr. Arturo Lomeli, the Award winning Master Distiller of Clase Azul Reposado® and La Pinta Pomegranate Infused Tequila®. Clase Azul ULTRA is an Extra
Añejo Tequila produced in the Arandas region of Jalisco, Mexico that will garner a retail price of approximately $1,700 in the U.S. This limited production Tequila represents a collaboration of excellence in producing the “Best of the Best” of Mexico: the best Tequila presented in a stunning, hand-crafted decanter. Only 100 bottles will be produced and available in MX and the U.S. markets.
Marketing tequila has shifted subtly away from lifestyle advertising to emphasizing tradition, heritage and quality. And product lines are being presented as cohesive units, not merely single entities.
On the lower end of the scale, the agreement reached between Mexico and the USA over bulk (mixto) tequila might seem a victory for American bottlers, but it came with many restrictions, not least in prohibiting American bottlers to adulterate bulk tequila in the USA. This may change the way alcohol companies deal with mixto tequilas, and may encourage more to move into 100% agave products.
Bottling in Mexico means higher shipping costs, which means a higher price on the shelf. I predict that to move forward into a bigger and more profitable market, Mexican producers will have to allow bottling of 100% agave tequilas outside Mexico, in order to get the per-bottle price to a more consumer-friendly and competitive bracket. This will also increase the role of the CRT in monitoring external bottling to ensure the product is not adulterated after leaving Mexico.
AC Neilsen reported flavoured spirits of all types made up more than 25% of all spirit growth in 2005, although they only accounted for a small portion of sales. Although several companies have come out with new lines of flavoured tequilas, it remains to be seen if flavoured tequilas capture a new market or simply confuse the consumer. Many companies are waiting to see if these new products have any success before venturing into the new field.
There are many competitors in the tequila liqueur market, including a variety of cream products like Baja Rosa, Baja Tango, Baja Luna, Baja Mocha, Coquila, Tequila Rose, Tequila Rose Cacao, Tequila Rose Java, TJ Toad Tequila & Tropical Creme, TJ Toad Tequila & Vanilla Creme and many others. No one has shown any research to indicate there are enough consumers for all of the available products.
Worldwide challengesAnother potential challenge to tequila producers is the South African agave spirits. South Africa has millions of blue agave, imported as a decorative and boundary plant many decades ago, now growing wild across the Karoo. Some producers have started harvesting these for a new spirit. Originally they intended to call it tequila and confront the Mexican monopoly head on, but when confronted by a legal challenge from Mexico over the Denomination of origin, the producers opted to call their new liquor an 'agave spirit.' It started appearing on shelves around 2004. Whether this new spirit will win the hearts and minds of consumers remains to be seen. However, it might draw some market share away from tequila if the producers can craft a product that equals or betters Mexican tequila in taste and quality.
While the RSA operation closed in 2009, it still remains a potential threat is another company moves into that production.
China is aggressively moving into the alcohol market. Vineyards are being planted in great numbers to respond to the growing internal market. Spirit production is also increasing. While not yet prepared for an international market in alcohol, China's track record in manufacturing suggests it could be a potential threat to alcohol producers if it becomes aggressive in exporting alcohol. Blue agave could be grown in China and Chinese visitors have been in the tequila region of Mexico, visiting distilleries, several times over the past few years.
A market with great potential for agave growers - but yet only marginally tapped - is the health food and commercial food production industries, where agave nectar is showing great growth and sales. South African producers could also make headway into this market before Mexican producers establish themselves firmly. And then there's the potential world market for inulin (see the agave page) which could boost the agave market.
Tequila-flavoured ice cream? Maybe it will be next summer's big hit... A tequila and lime ice cream won the "Best New Product" award at the 2003 Research Chefs Association (RCA) Annual Conference and Trade Show in San Diego. The product was demonstrated by Wynn Starr Flavors (WS). Also in 2003, a Dutch company introduced Freaky Ice - popsicles in three alcohol-infused flavours: tequila, vodka and a cocktail blend. The popsicles contain 4.8% alcohol, and were reported to be a hit with international club-goers. Margarita popsicles are another item to beat the heat.
Smells so sweet! Tequila as a perfume. Here's a story from Doubleagent.com that should delight those who find the smell of the agave irresistible:
For those of us who enjoy fine tequila, there's
some good, yet somewhat odd news. A pricey brand of tequila has been
transformed into a fragrance, so you can now smell just like the drink
you love.
And then there's Jo Malone's "Blue Agava and Cacao" perfume, although it doesn't list any agave in the ingredients:
Inspired by the rhythm and vibrancy of Latin music,
Blue Agava & Cacao is a sparkling citrus melody of lime and grapefruit
leads to an exquisite heart of the blue agava. A sensual blend of
vetiver, cinnamon and the primitive rawness of cacao, make an unexpected
and surprising harmony. Where we go from here
And finally, tequila may come to help the world's demand for fuel, in a roundabout way. A bacteria that lives on the outside of the blue agave has been used to create cellulosic ethanol, which may prove an even greener, more environmentally-friendly fuel than ethanol. According to a story in the Wall Street Journal, January, 2006:
WILMINGTON, Del.—One way to wean America from its
addiction to foreign oil might well lie in the muddy solution swirling
about a glass container on top of a DuPont Co. laboratory bench.
The bacteria is Zymomonas mobilis (also known as Z. lindneri,
Thermobacterium mobile or Pseudomonas lindneri). It is one of the key
organisms responsible for the production of agave nectar into pulque
(along with Lactobacillus plantarum, Leuconostoc sp., and S. cerevisiae.
Tequila and mezcal, which are also made from agave species, are the
results
The business of replacing agave with corn is still fermenting, and will likely accelerate in 2008. January 2008 is a key date for corn producers in the US and Mexico, because that's when free trade for corn between the two nations will begin. And the demand for bio-fuels will be even hotter next year.
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