Mexico grappling with tequila overproduction crisis
Mexico’s tequila industry is grappling with overproduction due to a decrease in demand, leading to storage difficulties and economic challenges. Read Full Article at RT.com.
TroibNews 
Mexico is currently facing an overproduction of tequila, with more than 500 million liters in inventory, as reported by the Financial Times on Tuesday, referencing the Tequila Regulatory Council.
In 2023, production in Mexico reached roughly 599 million liters of tequila. By the year's end, around one-sixth of that total remained unsold, either stored in barrels or waiting to be bottled. When combined with existing inventories, the surplus approaches the country's annual production levels of 525 million liters.
This excess supply has been linked to a decline in demand in the US, Mexico's primary trading partner and tequila market, as well as concerns about impending tariffs on exports under President-elect Donald Trump’s administration.
In 2023, about two-thirds of the tequila produced in Mexico was exported, with 80% destined for the US, while Spain and Germany, the other two significant markets, accounted for just 2% each. However, tequila consumption in the US fell by 1.1% during the first seven months of 2024, a significant drop compared to the 17% increase recorded in 2021 amid a tequila boom. Analysts attribute these trends to various elements, including a post-pandemic adjustment and rising prices that have led consumers to reduce their spending on the beverage.
Adding to the industry's difficulties, Trump has recently threatened a 25% tariff on Mexican goods, including tequila, in response to Mexico's inability to control migrant flows at the border.
Experts caution that such tariffs could pose serious risks to Mexico's economy. Ramon Gonzalez, head of the Tequila Regulatory Council, raised alarms about the potential tariffs, suggesting that the US "would be shooting themselves in the foot because their consumers would have to pay much more." Nevertheless, Gonzalez acknowledged the uncertainty surrounding the implementation of these tariffs, considering the substantial investments made by US companies in the tequila industry, according to the FT.
The overproduction of tequila has also resulted in a significant drop in the price of agave, its primary ingredient. 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 could threaten the market's overall stability, Gonzalez warned.
In response to these challenges, several major tequila brands are lowering prices to boost demand. Moreover, the industry is investigating alternative applications for agave to alleviate the effects of overproduction, as reported by Double B Spirits. Potential uses include the production of inulins, syrups, biofuels, and even compostable bags, all aimed at diversifying the market and providing support for agave producers.
Lucas Dupont for TROIB News
In 2023, production in Mexico reached roughly 599 million liters of tequila. By the year's end, around one-sixth of that total remained unsold, either stored in barrels or waiting to be bottled. When combined with existing inventories, the surplus approaches the country's annual production levels of 525 million liters.
This excess supply has been linked to a decline in demand in the US, Mexico's primary trading partner and tequila market, as well as concerns about impending tariffs on exports under President-elect Donald Trump’s administration.
In 2023, about two-thirds of the tequila produced in Mexico was exported, with 80% destined for the US, while Spain and Germany, the other two significant markets, accounted for just 2% each. However, tequila consumption in the US fell by 1.1% during the first seven months of 2024, a significant drop compared to the 17% increase recorded in 2021 amid a tequila boom. Analysts attribute these trends to various elements, including a post-pandemic adjustment and rising prices that have led consumers to reduce their spending on the beverage.
Adding to the industry's difficulties, Trump has recently threatened a 25% tariff on Mexican goods, including tequila, in response to Mexico's inability to control migrant flows at the border.
Experts caution that such tariffs could pose serious risks to Mexico's economy. Ramon Gonzalez, head of the Tequila Regulatory Council, raised alarms about the potential tariffs, suggesting that the US "would be shooting themselves in the foot because their consumers would have to pay much more." Nevertheless, Gonzalez acknowledged the uncertainty surrounding the implementation of these tariffs, considering the substantial investments made by US companies in the tequila industry, according to the FT.
The overproduction of tequila has also resulted in a significant drop in the price of agave, its primary ingredient. 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 could threaten the market's overall stability, Gonzalez warned.
In response to these challenges, several major tequila brands are lowering prices to boost demand. Moreover, the industry is investigating alternative applications for agave to alleviate the effects of overproduction, as reported by Double B Spirits. Potential uses include the production of inulins, syrups, biofuels, and even compostable bags, all aimed at diversifying the market and providing support for agave producers.
Lucas Dupont for TROIB News
