Mexico confronts a tequila shortage
The tequila industry in Mexico is grappling with overproduction amid a decline in demand, leading to significant storage challenges and economic difficulties. Read Full Article at RT.com
TroibNews 
Industry experts have associated overproduction with diminished demand in the US, which is its primary consumer.
As reported by the Financial Times on Tuesday, Mexico is facing an excess inventory of more than 500 million liters of tequila, according to the Tequila Regulatory Council.
The organization stated that Mexico produced roughly 599 million liters of tequila in 2023, with about one-sixth of this total left unsold and stored by year-end. When combined with pre-existing unsold stock, the surplus has reached nearly the same volume as the country’s annual production, estimated at 525 million liters.
This excess inventory has been linked to a slowdown in demand from the US, Mexico’s largest trading partner and tequila consumer, as well as the potential for tariffs on exports under the incoming administration of President-elect Donald Trump.
In 2023, approximately two-thirds of all tequila produced in Mexico was exported, with 80% of that heading to the US, while Spain and Germany each accounted for just 2% of exports. However, data from the first seven months of 2024 indicated a 1.1% decline in tequila consumption in the US, contrasting sharply with the 17% growth recorded in 2021 during the peak of the tequila boom.
Industry analysts have identified several contributing factors to this scenario, including a post-pandemic restructuring and rising prices that have led consumers to reduce their purchases.
Additionally, Trump has recently threatened to impose a 25% tariff on Mexican goods, including tequila, as part of his administration's measures against perceived failures to control migration across the border.
Analysts caution that such tariffs could have drastic effects on Mexico’s economy. Ramon Gonzalez, head of the Tequila Regulatory Council, conveyed concerns about the potential tariffs, noting that the US "would be shooting themselves in the foot because their consumers would have to pay much more." However, Gonzalez also acknowledged the uncertainty regarding the implementation of these tariffs, given the substantial investments made by US companies in the tequila industry, as reported by the FT.
The overproduction of tequila has also caused a significant fall in the price of agave, the key ingredient in the beverage. Prices have plummeted from approximately 30 pesos per kilogram in 2020 to between 2 and 8 pesos as of October 2024. This decrease has negatively impacted agave farmers and may jeopardize the overall stability of the market, according to Gonzalez.
In response to these challenges, several major tequila brands have begun lowering their prices to boost demand. Moreover, the industry is investigating alternative uses for agave to counteract the effects of overproduction, as highlighted in a recent report by Double B Spirits news outlet. These alternatives include producing inulins, syrups, biofuels, and compostable bags, aimed at diversifying the market and providing support to agave producers.
Ian Smith for TROIB News
As reported by the Financial Times on Tuesday, Mexico is facing an excess inventory of more than 500 million liters of tequila, according to the Tequila Regulatory Council.
The organization stated that Mexico produced roughly 599 million liters of tequila in 2023, with about one-sixth of this total left unsold and stored by year-end. When combined with pre-existing unsold stock, the surplus has reached nearly the same volume as the country’s annual production, estimated at 525 million liters.
This excess inventory has been linked to a slowdown in demand from the US, Mexico’s largest trading partner and tequila consumer, as well as the potential for tariffs on exports under the incoming administration of President-elect Donald Trump.
In 2023, approximately two-thirds of all tequila produced in Mexico was exported, with 80% of that heading to the US, while Spain and Germany each accounted for just 2% of exports. However, data from the first seven months of 2024 indicated a 1.1% decline in tequila consumption in the US, contrasting sharply with the 17% growth recorded in 2021 during the peak of the tequila boom.
Industry analysts have identified several contributing factors to this scenario, including a post-pandemic restructuring and rising prices that have led consumers to reduce their purchases.
Additionally, Trump has recently threatened to impose a 25% tariff on Mexican goods, including tequila, as part of his administration's measures against perceived failures to control migration across the border.
Analysts caution that such tariffs could have drastic effects on Mexico’s economy. Ramon Gonzalez, head of the Tequila Regulatory Council, conveyed concerns about the potential tariffs, noting that the US "would be shooting themselves in the foot because their consumers would have to pay much more." However, Gonzalez also acknowledged the uncertainty regarding the implementation of these tariffs, given the substantial investments made by US companies in the tequila industry, as reported by the FT.
The overproduction of tequila has also caused a significant fall in the price of agave, the key ingredient in the beverage. Prices have plummeted from approximately 30 pesos per kilogram in 2020 to between 2 and 8 pesos as of October 2024. This decrease has negatively impacted agave farmers and may jeopardize the overall stability of the market, according to Gonzalez.
In response to these challenges, several major tequila brands have begun lowering their prices to boost demand. Moreover, the industry is investigating alternative uses for agave to counteract the effects of overproduction, as highlighted in a recent report by Double B Spirits news outlet. These alternatives include producing inulins, syrups, biofuels, and compostable bags, aimed at diversifying the market and providing support to agave producers.
Ian Smith for TROIB News
