Agave Shortage & Increasing Price of Tequila
Tequila has taken off in popularity in Europe, with export volumes to Spain, France, Britain, and Germany outpacing global growth of 23%, according to Mexico’s Tequila Regulatory Council. However, the increased demand has led to a shortage of agave, the key ingredient used to make tequila. Agave prices have been edging up over the past few years, and reached 31 Mexican pesos at the end of 2022, compared to 5-7 pesos per kilogram for the past two decades. The price is expected to be 28 pesos at the end of 2023, but demand has “kept surprising on the upside,” warns Bernstein analyst Trevor Stirling. As a result, the cost of tequila has jumped, with European consumers paying nearly 16% more in stores in December compared with a year before.
The shortage of agave has also constrained the flow of high-quality 100% agave tequila to Europe, which has to be bottled in Mexico. The COVID-19 pandemic has disrupted the supply chain, adding to the supply shortage. Despite these challenges, Diageo reported that its global tequila sales volumes rose by 15% in the second half of 2022, far outpacing overall spirit sales, which edged up 3%. The Mexican spirit accounted for 11% of its reported net sales, with Don Julio rising 26% and Casamigos 29%.
European demand for tequila has been slowly increasing for years, and the pandemic boosted sales as home drinkers looked for new and exciting options. Some industry players say that tequila has been driving “premiumization,” which emphasizes quality and exclusivity, and is driving prices higher. Furthermore, there are fewer tequila brands in Europe than in the United States, where the market is more mature and competitive.
The shortage of agave is expected to ease in the future, as agave that was planted a few years ago will eventually be ready to harvest. Luis Fernando Felix, head of the US and Canadian operations at Proximo Spirits, the subsidiary of Mexican distiller Becle that manages Jose Cuervo distribution, predicts that in about two years, the price of agave will go down because supply will be greater than demand. Despite the challenges, tequila remains the fastest-growing spirit in Europe, according to Proximo Spirits, and its popularity is showing no signs of slowing down.
Even though inflation continues to rise, our Tequila prices remain low, offering incredible value. Take a look at some of the great collections we have below:
