The number of registered agave producers soared from 3,180 in 2014 to 41,000 in 2023. For several years, the region was filled with a sense of possibility, even among those who had no land to farm. Opportunistic investment firms created cryptocurrency-like trading websites to encourage Tapatíos to place bets that the price of agave would continue to rise.
Antonio, 44, and his partners spent 2 million pesos over the next few years renting land, buying agave plants and paying for their upkeep. He kept up his medical practice, but went to his plantations so often, he used them as an investment and an escape. If he had chosen another crop — corn, for example — he would now be waiting for his seventh harvest. But agave is a plant designed to survive in desert environments. It stores its energy carefully and takes up to seven years to reach maturity.
A couple of years after planting his crops, Antonio secured a contract with a tequila producer who promised to buy his plants. The deal gave him the confidence to plant more, but it didn’t include any kind of price protection. In 2022, when his first crops were still a couple of years away from maturing, he started hearing talk of falling prices. Within two years, the spot price had plummeted to between 1 and 3 pesos per kilogram. “We started planting very excitedly, making the investment when things were going well without really knowing that everything is cyclical,” he says.
Stories like Antonio’s have now crystallized into tequila industry lore: the unfortunate middle-class professionals, who helped fuel the agave oversupply crisis now rocking Jalisco. “There are a lot of people who invested in agave with borrowed money, some even sold their houses,” he says. He cut back on maintenance at his crops, risking disease, and hopes to salvage some to pay off his debts. “A lot of the responsibility falls on the tequila industry. If that contract hadn’t existed, I wouldn’t have planted as much as I did.”
On the brink of collapse
The main highway linking Guadalajara to the town of Tequila is lined with agaves. Rows of plants stretch in a sea of blue-gray, all the way to the foothills of the Jalisco mountains. At the edge of the road, the patchy crop often escapes its fence and sprouts from the sidewalks, growing in the dust kicked up by passing cars.
The strain of agave that grows here, Agave tequilana, or blue agave, is the main ingredient in tequila, once a party liquor consumed in shots in shot glasses at nightclubs and mixed into margaritas, it is now positioned as a premium sipping liquor.
Multinational beverage giants such as Diageo, Bacardi, Suntory and Pernod Ricard have invested billions in acquiring tequila brands, building ever-larger distilleries and mechanising production processes in a bid to secure a foothold in the next big thing in alcohol. Diageo’s CEO has promised to take tequila global by 2023 with brands such as the wildly popular Casamigos, founded by George Clooney – who bought Diageo for $1bn in 2017 – and heritage brand Don Julio.
Behind the celebrity-fuelled tequila hype lies an agricultural sector on the brink of collapse. Although tequila remains the world’s fastest-growing alcoholic beverage, the peak of growth has passed and people who drink are cutting back. This was already particularly true in the US, tequila’s biggest export market, before President Donald Trump proposed starting a trade war. While large producers with long-standing relationships with tequila houses can weather the cycle, farmers without solid contracts are now desperately trying to unload their agave into a saturated market.
Agaveros, or agave growers, from the highlands of Jalisco drive into towns, begging distilleries to buy their piñas, the heart of the plant, which is cooked and macerated to make the juice that becomes tequila. “They would line up, knock on doors,” says Guillermo Erickson Sauza, a fifth-generation producer from the historic Sauza tequila family.
Sauza’s distillery, Fortaleza, which has a cult following among American tequila connoisseurs, is in the heart of the town that gives the drink its name. Surrounded by hills, Tequila is a tangle of low, brightly painted buildings festooned with flags and housing makeshift tourist spots. Behind tall gates and colonial arches are about 20 tequila distilleries, some more than 200 years old, passed by the occasional pedibus (a group of people walking together on a walking route) carrying drunken vacationers.
Sauza, who cuts a distinctive figure in a rancher’s hat and motorcycle jacket, says he was stopped on the street last year by farmers who begged him to accept a truckload of pineapples each month. “That’s what it boils down to,” he says. “They lose 10 years of their life (to farming).”
Small farmers have already begun to abandon cultivation, burning half-ripe plants and replanting corn. Tequila producers fear that diseases will spread through abandoned fields.
This price boom and bust is not the first time this has happened in the industry. Shortages of agave drive up the price, which in turn encourages more to be grown, resulting in an inevitable oversupply. Sauza recalls a similar situation 15 years ago. However, experts say that this time the magnitude of the boom is unprecedented. And the crisis is only going to get worse as the agave planted during the boom matures.
A disgruntled guild
Last month, a group of agave growers gathered to protest along the highway from Guadalajara to the city of Tequila, temporarily blocking agave trucks. Around Jalisco, farmers have begun protesting the Tequila Regulatory Council (CRT), which they blame for the plummeting price of agave.
At a small round table in the garden of a hacienda outside Tequila, eight men sit in the shade, holding small plastic cups for a drink. Newcomers to the scene are greeted with a shot of tequila from a chipped jug. Their leader is the imposing Julián Rodríguez, a 73-year-old agave farmer and longtime activist who says he spent two years on the run, three years in prison and survived multiple assassination attempts related to his activism.
The group listens in rapt silence as Rodríguez, with an intense gaze, recounts that he comes from a family of “rebels” with deep roots in the region. As he speaks, he gestures toward two of the spectators, who stand up and unfurl a sign depicting him with a bloodied face at a protest in the 1990s. At the time, he represented El Barzón, a protest movement of middle-class farmers that was gaining strength amid a devastating financial crisis and opposed the signing of the North American Free Trade Agreement (NAFTA) between Mexico, the US and Canada.
“My grandfather joined the Mexican Revolution with Pancho Villa,” he tells us. “One day I stood up against the tequila industry, being a very poor man. I am still poor, but life has changed for me. I see that this town that gives its name to the drink receives absolutely nothing in return.”
The group calls itself the Mexican Agave Council and wants official government recognition to represent the agave industry. Its members are among a growing number of farmers organizing amid the crisis and turning to agricultural union leaders to help raise awareness of their plight.
Their main demands are the implementation of stricter rules to allow only agave sugar to be used in tequila production (right now, a mixed tequila can be 49 percent cane sugar) and centralized control of agave planting.
The rules are governed by the CRT, which also controls the registration of agave plantations. Rodriguez’s group says the regulator has failed to live up to its responsibilities and blames it for the collapse of agave prices.
Tensions between farmers and what they see as foreign invaders who profit from their labor recur throughout Mexican history, from the Spanish conquest to the signing of NAFTA.
It is not clear how many producers the council represents. Many agaveros are nervous to speak out for fear of losing the small opportunity they have to sell their agave, and others disagree with the group’s philosophy. “It is not possible to regulate it,” says one agave producer who requested anonymity. “For years it has been the same, the price of agave falls, people get discouraged and do not plant, then come back.” And, he adds, “Who can say that the council will not become a middleman that takes the profits? “It is better to let the market fix the crisis.”
At the hacienda, agave growers pass around newspaper clippings that tell the story of Rodriguez’s past exploits. Behind them, a painted mural depicts a romantic image of the jimador (a farmer who harvests agave) with his long coa blade, the rolling hills of Jalisco in the distance.
“We are going to stop all agave,” Rodriguez says. “And if the agave is lost, let it be the agave of the multinationals. We have already decided. The good thing about this spirit is that it makes us brave,” he adds, taking a drink.
In January, weeks after the meeting, dozens of grim-faced agave growers protested along the road carrying signs and shouting: “We do not want more lies, we demand a solution.”
The Tequila Glut
The facade of the CRT office in Guadalajara is dominated by a mirror shaped like an agave leaf that stretches toward the Mexican sky. In an imposing conference room, 12 representatives of the council sit around a huge oval table that fills the room, with microphones and CRT-branded water bottles and coffee cups at every place setting.
The body is solely responsible for the Denominación de Origen (DO) of tequila internationally and for certifying tequila products, ensuring that they conform to industry specifications. The CRT, a “civil society organization” rather than a state regulatory body, has overseen the industry since the 1990s, contributing to its phenomenal success in the U.S. and in trying to open markets.
Representatives introduce themselves before launching into a presentation detailing the CRT’s remit across the tequila and agave supply chain, from providing “passports” for new agave plantations to testing the liquid to ensure it meets their specifications.
THE FACT
599 million liters of tequila produced in 2023,
About a sixth of that was left in inventory in 2024.
Its director, Ramón González, acknowledges the problem of oversupply of agave and that a flood of misinformed people turned to agave cultivation. The CRT has a Socially Responsible Agave program to encourage producers to buy from small producers who were in the industry before 2017, but warns against intervening with excessive control. “It is not the responsibility of the industry or the government. Why? Because you cannot force people to plant or not to plant,” says González.
He rejects the legitimacy of many of the agave leaders who have so publicly denounced the program. “A guy puts on a hat and says ‘I defend the farmers.’ Many of them don’t even have agave.”
But many in the sector feel that the CRT is too dominated by larger companies and did not do enough to prevent the oversupply crisis. “The problem is that we know that the CRT is governed by the big factories,” says one tequila producer. “It’s a big industry that represents a lot of money.”
The CRT has a representative model of governance where decisions are collegial and each sector is represented, says the CRT’s legal director, Ricardo Soto. “Someone who produces 300 liters is worth the same as someone who produces 3 million.”
Alexis Álvarez, head of agricultural certification at the CRT, says it is not an authority that can control what people plant. “In a scenario where the price (of agave) rises to 32 pesos per kilo, there is no human power capable of stopping someone from establishing a plantation that seems so profitable.”
Still, some experts are concerned that not enough is being done. “The disproportionate increase in the number of agave plants, encouraged or not by the industry and intermediaries, shows the lack of land management by the State and planning by the Tequila Regulatory Council,” says José de Jesús Hernández López, an academic specializing in agave-based beverages at El Colegio de Michoacán.
“The time for rhetoric is over,” he adds. “Concrete actions, territorial planning and effective regulation are needed before the crisis worsens.”
The US remains the main market for tequila.
expand
The CRT has launched a plan to deal with the crisis, which includes promoting contract farming and strategic crop planning, using computer systems to better track the agave supply chain. A new statistics viewer is also being worked on to help decision-making, he says.
“I would dare say that it is the drink with the greatest control and traceability of all alcoholic beverages in the world,” says Alvarez. “We will continue working to make the drink grow and instead of thinking about how much additional agave there will be, let’s think about how much more tequila can be sold.”
Diageo’s gamble
Unlike whiskey or vodka, which are made from easily accessible raw materials, there is an entire agricultural industry that has developed around tequila. Multinationals, for whom the acquisition of raw materials is usually a more distant activity, had to take great risks. “It’s taken a lot of learning,” says Ewan Andrew, president of global supply chain and procurement at Diageo, which in less than a decade has grown from a small player in tequila to the industry leader, with the largest presence of any beverage maker in Mexico.
Andrew acknowledges that tequila producers like Diageo bear some responsibility for creating the crisis and need to come together to find a solution.
As the largest player in tequila, Diageo quickly embedded itself not only in Mexico’s tequila industry but also in local communities, building infrastructure, schools, water sustainability projects, along with its mega-distilleries and agave plantations.
Diageo has had interests in tequila for decades, but took its first big step in 2015 with the purchase of Don Julio and its distillery, La Primavera, in Atotonilco El Alto, a town in the highlands of Jalisco. For influencers and bartenders visiting the distillery, it’s an idyllic picture of an industry where traditional processes still reign. Workers prepare stacks of agave hearts for processing using traditional coa blades, cutting the piñas into sections, revealing the foamy white pulp inside, before loading them into a row of brick ovens. The smell of cooked agave, rich and sweet like dark molasses, permeates the building.
But only a fraction of the liquid shipped around the world is produced here. As demand for tequila surged, Diageo had to expand its distilling capacity. Even with two distilleries working at full capacity, Diageo couldn’t produce enough tequila.
During the Covid-19 pandemic lockdowns, consumers drank through their savings, experimented with cocktail-making and generally drank more than ever. In 2021, at the height of the boom, Diageo invested $500 million in additional production, including a new tequila distillery called La Barca in southern Jalisco. That year, Diageo’s tequila sales soared 79 percent.
But then demand began to falter. People who drink in the U.S. began cutting back. The amount of spirits sold in the country fell for the first time in 30 years in 2023, and in the first seven months of 2024 it fell 3 percent compared with the same period a year earlier, according to data provider IWSR.
Tequila in free fall.
Tequila consumption during the same period fell 1.1 percent, a rapid slowdown compared with the 17 percent increase in 2021. Mexico now has more than 500 million liters of tequila in inventory, almost as much as its annual production. Despite the slowdown, in the six months through December, Diageo’s total tequila sales grew 20 percent, and Don Julio’s rose 50 percent.
The tequila cycle
Consumers sipping margaritas and palomas in bars in New York and London have little idea of the seven years of cultivation that go into making their tequila. At El Gallo Altanero, a patio bar in Guadalajara’s Colonia Americana neighborhood, bartender Sophie Henault brutally disparages tequilas produced by multinationals.
El Gallo offers smaller-batch brands like G4 and El Caballito Cerrero, a rare spirit that has avoided the CRT’s seal of approval and is labeled “agave distillate” instead of tequila so it doesn’t have to adhere to its standards. The only mass-produced tequila in the line is Patrón.
As they serve specialty cocktails to customers seated at the bar under dim red lighting, the staff joke that the only way to open a bottle of Casamigos is to smash it on the floor. But among industry veterans, the mood is less one of outrage than resignation.
Erik Seiersen, who led Diageo’s Mexico business during its meteoric expansion from 2013 to 2019, worked at Sauza Tequila two decades ago during the last agave price crash. His strategy then was to lower the price and move to a mass-market offering, which he says ultimately brought tequila to a broader audience. Something like that seems to be happening now, with the flood of celebrity-backed brands offering their tequila at discounted prices.
Seiersen argues that devaluation could put tequila on a better long-term trajectory. Yet despite his optimism, he has fears, and not just because of the current oversupply. “The next demand cycle, like any cycle in the free market, goes up even more and down even more.” Last time, the price of agave shot up to 16 pesos per kilogram and dropped to 3. This time it went up to 30 and dropped to 2, which in real terms, taking inflation into account, was much lower, he reasons. “Next time it will be the biggest and steepest drop in history.
Source: milenio
