China Opens Its Bars to Mexican Tequila – What Does This Mean For The Tequila Industry?

We love social media here at Tequila Aficionado.  It is an exciting way to spur some fascinating discussions about our favorite topic – tequila!

Our own M.A. “Mike” Morales recently posted this news piece on Facebook about the introduction of tequila to the Chinese market.

Lisa Pietsch responded by saying:

While it may be good for Patron Tequila (whose representatives were interviewed and featured in the piece), I believe this is excellent news for the smaller brands emerging.  Once the Chinese get a taste for tequila, they’ll be looking for more.    

Aficionado Rick Thibault Levy responded passionately with the following commentary.  We felt it would be a great Op Ed and spur further discussion by Tequila Aficionado readers.  He poses some interesting questions.  Please remember the opinions expressed in this Op Ed are not necessarily those of Tequila Aficionado:

It’s all just a guess, but I don’t think it will be good for the little guys.

The small craft brands struggle to get distribution and space on the bar in the US, a developed tequila market right next door.  I would think it would be even harder for them on the other side of the world.  The big industrial mass-market brands will be able to expand their markets, but I wouldn’t see this affecting our favorite juices in the short-term.

You may find a few tequila bars popping up in major cities in a few years after the Chinese have developed a taste for it through the major brands, but they will initially have to import their own supply of craft tequilas.

As the market develops in China, I’m sure you’ll see the major producers lobby to expand the appellation of origin to allow for greater production.  With increased production over a larger area, and the low genetic diversity within the Weber Agave species, the entire industry will be more susceptible to blight.

As demand for limited agave increases, prices will rise.  I’d like to know what percent increase small brands can afford to pay for agave before they are no longer cost effective.  The smaller craft producers that don’t grow their own agave will be priced out of the market. The ones that do grow their own, but don’t have a recognizable name, won’t be able to sell enough of their juice to justify ongoing production when they can make a decent profit selling their agave to the big producers.  Just like with the big brands, higher production volumes equal lower quality and this would be on a macro scale.  The craft distillers will need to build name recognition now or they will not survive the market forces.

On the Chinese side, once the market develops a taste for high quality agave spirits, they won’t necessarily be willing to pay up for authenticity.  Entrepreneurs in China will look to meet demand at a lower price point with agave spirits produced entirely within China.  With all that land mass, there must be someplace with growing conditions similar to Mexico’s.  And the Chinese won’t care about the appellation of origin.  They’ll copy the process and call it tequila for the Chinese market.  Mexico will be able to do nothing about it.  The big brands like Sauza and Patron may do the same thing with Chinese crops within China because they must know someone else will do it if they don’t.

The greatest opportunity for a craft producer would be to relocate to China now before the market conditions become too difficult in Mexico, find that ideal growing region and start planting now.  By the time the first harvest is ready, the local market will be primed.  However, you have to believe the big industrial producers are already thinking of this as well.

Think about it, when you are buying a sparkling wine, do you care if it’s actually from Champagne if the California version is just as tasty?  Do you have any qualms about referring to that California version as Champagne?

So we ask you, our readers, what are your thoughts on this topic?

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Lisa Pietsch is the Chief Operations Officer of Tequila Aficionado Media, a USAF veteran, a multi-published novelist and freelance writer, a social media marketing consultant, and the mother of two boys. She has a passion for good tequila, foreign languages, and travel in all forms. Lisa currently makes her home in San Antonio, Texas.