High-End Tequila Sees Record Demand
As Perceptions Change

Source: DOW JONES NEWSWIRES By Jean Guerrero

Dec 3rd, 2010

Demand for 100% blue-agave tequila is breaking records as more and more foreign drinkers adopt a new attitude toward the liquor they once gulped down with grapefruit soda and a grimace.

Mexico 's exports of the top-shelf tequila--made entirely from juice of the blue-agave plant--increased 24% in January through October from a year earlier, to a record 39.8 million liters, according to government figures.

Most exports of 100% agave tequila went to the U.S., where the market for the spirit has been growing steadily since 2001 as demand for high-end tequila has penetrated beyond U.S. border states.

"Few other spirits have re-invented themselves the way tequila has," said Greg Cohen, corporate communications director for Patron Spirits Co., a unit of Patron Spirits International AG. "Twenty years ago, most people's perception of tequila was as a low-quality, hard-to-drink spirit. Now it's a competitive, luxury product."

As demand for 100% agave tequila grows, interest in cheaper tequilas--known as mixtos and made with as little as 51% agave and up to 49% other sugars--is slowing down. Exports of mixto tequilas increased only 5% in the January-October period, and in 2009 exports totaled 99 million liters, down 13% from their peak in 2006.

Despite increasing demand, millions of agave plants lie rotting in the desert due to an excess of product generated during the early 2000s, when the price of the plant was above 16 Mexican pesos ($1.30) a kilo. Since agave plants can take up to 10 years to mature, prices had plummeted by the time the plants were due to be harvested, and some producers are having a hard time finding a place to sell their plants for a profit.

But others are taking advantage of the interest in 100% agave tequila, investing in their own distilleries and processing as many agave plants as they can before they spoil.

Mexico 's National Tequila Industry Chamber has helped to spur the change in public opinion, working on government-subsidized programs that offer tequila tastings and lessons.

"The reality of tequila today is very different from tequila 20 or 30 years ago," said Francisco Soltero, president of the chamber. "People remember drinking tequila as a very intense, aggressive experience. They say, 'When I was young and on vacation, it didn't go very well. And ever since, no more.' So what we do is invite them to try it, and the change in perspective is huge."

Top tequila companies, including Tequila Cuervo SA's Tequila Cuervo and Sauza Tequila Import Co.'s Sauza Tequila, say growth in sales of their silver, 100% agave tequilas has been the most pronounced. Whereas rested, or "reposado," tequila sits in wooden barrels for several months and "anejo" tequila ages for at least a year, silver tequilas are bottled immediately after distillation. That way, they maintain a clear color and the predominantly sweet smell and taste of the agave plant, rather than an oak flavor and amber color.

Cohen said Patron's marketing of the silver variety has allowed it to attract consumers who might otherwise drink vodka, gin or other white spirits.

Hudson Riehle, senior vice president of the U.S. National Restaurant Association's research group, said more and more restaurants are offering tequila tastings to educate customers about the spirit.

Since 1974, tequila has been a denomination-of-origin product, meaning it can only be called tequila if produced in a specific region in the Mexican states of Jalisco, Nayarit and Michoacan. The agave plants used to produce the spirit must also be grown in the area.

Industry officials say global interest in ultra-premium tequila has become especially prevalent since Mexico's establishment in 1994 of the Tequila Regulatory Council, which took over the responsibility of ensuring the quality of tequila from the government.

Agave and tequila producers must register the number and location of their plants with the council. They must also document their harvesting methods, fermentation processes, and distilling techniques for evaluation. Tequila, in different stages of production, is often tested in the council's laboratories.

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