The tequila industry, which has experienced rapid growth in recent years, is now facing a slowdown in sales and a challenging market environment.
Kendall Jenner’s 818 Tequila brand, one of the most high-profile brands in the industry, has slowed down hiring and dialed back spending on some of its marketing efforts. This move is seen as a sign that the industry is experiencing a downturn after years of seemingly stratospheric growth.
“We’ve observed a pull-back on discretionary spending and an increase in what we view as more deliberate purchases,” said Mike Novy, CEO of 818 Tequila. The company is focusing on its core lineup of tequilas to give customers the “best possible price.”
The slowdown in sales is not limited to 818 Tequila. According to a recent report from OhBev, an alcohol marketing agency, the tequila industry is facing a “critical juncture” with signs of market normalization following a decade of extraordinary gains.
Consumers are no longer spending as much on tequila as they were during the height of the COVID-19 pandemic when people stocked up their at-home bar setups. This has led to a wave of layoffs in the industry.
In addition, years of excessive demand have sparked an oversupply of agave, the main ingredient in tequila, causing prices to sharply decline as inventory goes unsold. This has damaged profits for farmers and added to the challenges faced by the industry.
The threat of tariffs is also looming large over the industry. Tequila currently falls under the free trade agreement signed by President Donald Trump with Mexico and Canada, which is set to expire next year. For now, that trade deal has allowed goods from America’s neighbors that comply to come in duty-free, but this could change.
Consumers are becoming more discerning in their purchases, opting for high-quality tequila at an affordable price rather than splurging on super-premium brands. This trend benefits companies like Pantalones, the two-year-old tequila brand created by Camila and Matthew McConaughey, which costs $45 for a 750 ml bottle of Blanco.
“Given the uncertain economic environment, people are being more cautious,” said Andrew Chrisomalis, co-founder and chairman of Pantalones. “Discernment would be the key word, and if you have that differentiated product, you should feel pretty good about yourself.”
Pantalones is eyeing the United Kingdom for further expansion, having recently inked a distribution deal with supermarket chain Tesco. The brand aims to tap into McConaughey’s star power to promote its products and educate consumers about tequila.
The uncertainty surrounding tariffs has prompted Pantalones, 818 Tequila, and other companies to stockpile their supply in the United States, which accounts for 80% of imports.
Source: CNN
