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The CRT only permits 5 states in Mexico to produce Tequila from the Blue Agave, (Michoacan, Guanajuato Nayarit, Jalisco & Tamaulipas. wineandspirit28th November 2016

Tequila y mezcal … Qué onda ?

Tequila y mezcal … Qué onda ?

By Dale Sklar , November 25th 2016

In 2002, aboard a BA flight returning from a week in Mexico , and flying back to London Heathrow with eleven hours to kill, I put pen to paper and wrote an article ‘ Tequila in crisis’.
I was unprepared for what happened when it hit the newswires; earning me around 20 radio and two TV interviews within less than one week. I had no idea then of the press interest in Mexico / Tequila.

Fifteen years later, I went to visit the distillery, La Alteña, in the Tequila highlands where our tequila Villa Lobos comes from, and now I seem to be writing the same article, except this time, it’s much more serious and far more urgent !

To set the scene : Tequila & Mezcal are two Mexican spirits made from the Agave plant, of which there are hundreds of types, however under Mexican rules, only the Blue Agave may be used to make Tequila, and therein lies part of the problem. There’s just not enough Blue Agave. Imagine if of the many hundreds of varieties of tomatoes, apples, bananas etc , the EU legislated only ONE type was permitted to be called A Tomato / Apple / Banana. That’s what’s happened in Mexico where the CRT (Consejo Regulador Tequila) sets the rules determining who could grow tequila, what plant they can use, which states are entitled to supply agave and where it may be distilled etc.

The CRT only permits 5 states in Mexico to produce Tequila from the Blue Agave, (Michoacan, Guanajuato Nayarit, Jalisco & Tamaulipas

The CRT only permits 5 states in Mexico to produce Tequila from the Blue Agave, (Michoacan, Guanajuato Nayarit, Jalisco & Tamaulipas)

Similarly the CRM (Consejo Regulador Mezcal) makes similar proclamations (normas) to ‘protect’ the status of Mezcal (or mescal), although many more varieties of agave are permitted than Tequila, which makes good sense and allows extra variation within the category. This may well influence, the CRT to consider a wider range of agave allowed to be used to make tequila in the future. There are also strong biological reasons as to why monoculture is a rather risky strategy , but that’s another article …

Over the past 18 months, I have hearing my Tequila suppliers changing their tune from:

Middle 2015 :-  “..the price of agave is so cheap, than unless we need some for distillation, it’s cheaper to let it rot in the fields, than collect it and cook it…”  to

Oct 2016 : “… Dale, the price of agave is going up weekly and I’m almost ashamed to be a tequilero, given what is happening to prices…” to

Nov 2016 “…  “ in 2002 when agave prices last skyrocketed, it went from 40 centavos per kilo to $14 mex peso per kilo over two years… this time, the price of agave has tripled to $11.4 mex pesos per kilo in just 10 months. The price could easily rise to $20 mexican pesos per kilo or even higher, and this crisis could well last at least three years.Take it easy with stocks for new customers of Villa Lobos, as we may well have no stocks… “ 

In 2002, the huge price increase was due to shortages caused by an increasing demand for agave due to growing world demand for Tequila and insufficient plants + a malady that became known as Cida del Agave (Agave aids) where apparently healthy plants suddenly withered and died (from an insect infecting plants with a bacterium / fungus), and then all of this compounded by a freak snowstorm which killed off many of these semi-desert plants. Numerous smaller brands disappeared as no tequila at a ‘market price’ was available, agave plants were raided from fields at night, & some agaveros resorted to night watchmen (Tequila police), and a new breed of ‘middleman’ who would hunt down and trade agave at sky high prices, and became known as ‘Coyotes’…  What amplifies these shortages is that unlike grapes, apples, pears and corn, where there is annual crop, Agave takes 7-9 years to grow and mature, so it would take a fortune teller to figure out how much agave is going to be required in 8 years time ! So feast and famine is virtually guaranteed.

Shortages = price rises = massive planting to take advantage of valuable cash crop = over supply = resultant falling prices = insufficient future planting, and so the cycle goes on…

 What has changed this time is a new factor and one that many writing about Agave have not really mentioned … roughly ½ the agave crop is being taken by a new player … the producers of ‘Miel de agave’, who cook and ferment the agave, press it and extract its super sweet juice which smells and tastes just like bees honey, although it’s probably far healthier as not only is it the highest naturally occurring Fructose (fruit sugar) in any plant, but also it has a much lower glycemic index, making it especially interesting to health conscious consumers and food manufacturers who want to be able to add all the buy points … No added sugar, organic, kosher, halal etc etc. This new component of the agave market was underestimated and not taken into account 8 years ago, when today’s ripe agave were planted = sudden shortages.

To make it even more awkward and costly for the distilleries, as there is so little ripe agave to buy , and prices are so high, agaveros are cutting down the small only partially ripe 4 year old plants which of course contain far lower fructose yields, and so whereas the standard formula used to be 6 kilos of ripe agave make 1 litre of 100% agave tequila … it now can take up to 10 kilos to make the same spirit, and at triple the cost per kilo. We are already putting up the price of Villa Lobos by 14% and in the Mexican domestic market, prices are increasing by around 20%.

Carlos Camarena (master distiller at Distileria La Alteña) & Dale Sklar , the joint owners of Tequila Villa Lobos examining the Agave before cooking in the ovens behind them last week in Arandas.

Carlos Camarena (Master distiller at Distileria La Alteña) & Dale Sklar , the joint owners of Tequila Villa Lobos examining the Agave before cooking in the ovens behind them last week in Arandas.

 

Prognosis : over the next three years given there will be very little agave left, much having been cut down at half the normal life-cycle, the bigger distilleries will struggle on, paying whatever they have to, in order to keep their ‘famous brands’ available and in stock, but refusing to release liquid to make the numerous small private label brands (maquila), and these will disappear from the shelves.
The world biggest and most famous tequila labels are mainly non-100% agave (mixto), and so less susceptible to these problems.
Some more famous high-end 100% agave brands may ‘give in’and  try to retain consumer appeal and sales volumes by switching from 100% Agave classification to ‘mixto’; thus requiring only ½ the amount of agave, and making the rest of the liquid with sugars from other non-agave sources, such as beet, sugar cane, sweet potato etc.

The agaveros are making a quick killing right now, but once the stock is sold … it’s gone ; and not everyone wants to re-plant and wait 8 years for the next crop, at an uncertain price.
The big brands will not find it easy managing these price increases, but will certainly enjoy the spectacle of numerous vanishing ‘private labels’ and on-shelf competition.
The miel de agave producers which bear much of the responsibility for this situation , unlike Tequila, has the flexibility to use other materials other then just ‘blue agave’ and that is what they are doing. They are experimenting with many other agave types, as well as other sugar sources… such as miel de camote (sweet potatoes)

 

Agave Syrup producers using alternatives such as sweet potatoes creating new products such as Miel de camote

Agave Syrup producers using alternatives such as sweet potatoes creating new products such as Miel de camote

Mezcal has suddenly come into vogue in the past few years, sparked by enthusiastic bartenders, and this new passion for Mezcal couldn’t have come at a worse time for them. They may have a much wider choice of agave than the tequileros, but it’s all fair game, and being uprooted from roadside verges an mountain tops, and the 8-25 years (depending on the variety of Mezcal) is the one non-variable and can’t be rushed!

Consumers whether in Mexico, USA or elsewhere will undoubtedly first try to buy up as much as they can before the well runs dry..and then becomes a  VERY expensive commodity. After that many will most probably switch some of their buying to cheaper tequila and will undoubtedly move category to rum, brandy & whisky , and THAT is what will eventually bring prices down, when no-one wants to pay the market price and the demand decreases. It will happen … it always has done, but until then … ‘Sera muy muy interresante !’   (gonna’ be interesting !)


Saludos compadres !

Dale Sklar© November 25th 2016

Dale Sklar is the Managing Director of Wine and Spirit International Ltd established in 1983. To contact the author please email ds@wineandspirit.com

1st bottle of Villa Lobos EVER to bottled at La Altena in 2011, part of Carlos Camrena's private collection

1st bottle of Villa Lobos EVER bottled at La Altena in 2011, part of Carlos Camarena’s private collection