The End of an Era
[Tweet “The Tequila 3 Ring Circus is in Town.”]
Inspired by this poignant and heartfelt Facebook post by Tom Nall, the gregarious co-founder of Republic Tequila, and Empresario LLC:
The Tequila 3 Ring Circus is in Town
A new circus has replaced “The Greatest Show on Earth.”
Imagine the spotlighted and off kilter Ringmaster who, in a booming Michael Buffer-eske voice announces–
“Ladies and gentlemen, turn your attention to Ring Number One!”
Unless, you’ve been living under a rock since January 2017 (we wouldn’t blame you if you are!), you’ve no doubt heard of POTUS’ proposed 20% import tax on Mexican goods to fund the building of “The Great Border Wall” with Mexico to prevent illegal immigration.
Further, POTUS has promised that Mexico itself would pay for the wall.
Anyone with an iota of understanding of economics knows that this tariff would simply be passed onto consumers by the manufacturers of these goods.
And that includes tequila producers and mezcaleros.
[Tweet “A 20% tax on #tequila and #mezcal would be devastating to other industries.”]
According to this recent article, the collateral damage to other peripheral industries would be devastating.
Moreover, the archaic Three Tier System that was established in the United States after Prohibition, and on which alcohol distribution is based, demands that each level of the tier also pass along this 20% tax.
“Clowns are the pegs on which the circus is hung,” P.T. Barnum
Once POTUS bullied Mexican President Enrique Peña Nieto in late January 2017 into cancelling his visit to the US if Mexico refused to pay for the 2,000 mile border wall, his strategy backfired.
Each leader took the war to Twitter.
While POTUS berated the Mexican President and screamed about the lopsidedness of the NAFTA agreement, Peña Nieto vehemently argued that Mexico would never pay for such a wall and managed to rally a divided country to his side.
It almost made us nostalgic to watch reruns of Destilando Amor, again.
Meanwhile, under the Big Top, the Center Ring was where everyone clamored to sit near because only the most prestigious routines happened inside.
“Ladies and gentlemen, we direct you to the Center Ring!”
In early February, an interesting thing happened in court. A precedential ruling was handed down in the case Luxco, Inc. v. Consejo Regulador del Tequila, A.C.
The decision allowed the CRT (Tequila’s governing body in Mexico) to register the word TEQUILA as a certification mark and control its use.
Wait! What?
Isn’t that the CRT’s job, anyway?
What changed?
The CRT aggressively protects Tequila like Disney or Levi’s conserve their trademarks.
When you read this article explaining the timeline and judgment of the case, you’re amazed at the depth of Luxco’s arrogance to file the lawsuit in the first place and to completely ignore Tequila’s geographic indication.
Surprising, too, since Luxco imports and distributes El Mayor tequila, and re-bottles Exotico and Juarez tequilas that are certified by the CRT as authentic, all at Destiladora González González (NOM 1143).
Makes you shake your head and wonder what Luxco was thinking.
“Ladies and gentlemen, feast your eyes on Ring Number Two!”
Rock & Roll Hall of Famer Sammy Hagar has found a way around his alleged Cabo Wabo Tequila non-compete clause, and recruited his friend and fellow rock star, Adam Levine of Maroon 5 to develop–
According to its marketing copy, it’s a blend of 100 percent blue agave and espadín agave to “create a smooth and rich tequila flavor with the sweet and smoky taste of mezcal.”
But, what is it?
It’s not completely tequila, even though the 100% blue agave tequila portion is being distilled at Sammy’s original maquiladora, El Viejito (NOM 1107).
It is still unknown, however, at which palenque the mezcal portion is being distilled, and whether it comes from an industrial producer or not.
One thing for sure, the label will NOT have a NOM number on it.
The Shell Game
As an adult, you realize now that the three ring circus was nothing more than an elaborate con. An enormous shell game dressed up in glittering sequined costumes and face paint to keep you guessing where the action would take place next.
The thrills and chills of trapeze artists, lion tamers, high wire stunts, acrobats, jugglers and clowns performing all at once.
Slight of hand and misdirection at its very best.
A View From the Cheap Seats
Unlike today’s stadiums and auditoriums, there was always a bad seat in the house underneath the Big Top, and chances were, you were sitting in it.
There was always a feeling of missing something–a triple somersault, or dancing stallions, or roaring big cats jumping through flaming hoops.
To keep track of the drama from one ring to another, you craned your neck, unless…
You sat in the cheap seats, high above in the nosebleed section.
“Ladies and gentlemen, back to Ring Number One!”
At first, there was some question as to whether tequila and mezcal would fall under the proposed tariff.
Being the largest consumer of tequila in the world, America’s agave lovers were hoping that their favorite spirits would be spared.
Since 100% de agave tequila, and other agave spirits with an appellation of origin, can only be made in Mexico, it seems that the additional tax is almost a certainty.
[Tweet “Newsflash: We knew the price of tequila was going up, anyway.”]
Newsflash!
We knew the price of tequila was going up, anyway.
We covered this in The Agave Shortage of 2017 is Worse Than We Thought.
Due to an unexpected snowstorm in Arandas in March 2016 that damaged agave crops; subsequent substantial contracts with medium sized maquiladoras (distilleries that produce tequila for various other brands) by transnational corporations tying up enormous quantities of tequila to be bottled under their labels; and aggressive competition for ripe agave by los mieleros (pharmaceutical companies), tequila prices were scaling up.
Whether Mexican spirits are affected by a tariff or not, or due to the scarcity of blue agave, look for prices to increase across the board.
“Ladies and gentlemen, let’s return to Ring Number Two!”
Speaking of the blue agave shortage…
Accusations persist that truckloads of espadin agave, generally used to make mezcal, are still being sent by the truckload from Oaxaca to Jalisco headed for tequila distilleries to fulfill pending orders.
Rather than hide this clandestine fact any longer, Sammy and friends have perhaps decided to take the practice public and spin it into Santo Mezquila.
As a result, long time mezcaleros like Doug French of legacy brand Scorpion, have taken to distilling whiskies from heirloom corn to ride out the storm of the espadin shortage.
Also, to conserve wild agave species, as well as to ensure future supplies for his wildly popular mezcal expressions, Doug has planted small plots of agave instead of trying to compete with deeper celebrity pockets.
“To the Center Ring for the Grand Finale!”
While we still scratch our heads about the Luxco court decision, and if, in fact, POTUS does levy a 20% tax on all Mexican imports, including Mexican beer and spirits, here’s a few possible scenarios to consider.
The Human Cannonball
If the above cited article is correct, beer and tequila companies are using NAFTA only 8% of the time, and tequila comes in free for all World Trade Organization (WTO) members, anyway.
The proposed tariff would, in essence, tear up NAFTA, regardless of whether POTUS decides to renegotiate it or not, and fire a message across to Mexico that he’s not kidding around. But…
Mexican President Peña Nieto has an ace up his sleeve.
More Fun than a Barrel of Monkeys
Remember this flash from the past from 2003?
POTUS’ blatant disdain for Mexicans could lead to the CRT and Mexico retaliating by requiring that all tequila shipped in bulk to the United States be bottled in Mexico to insure the quality of the juice.
The consequences of this move, as described in the above cited DISCUS (Distilled Spirits Council of the United States) press release could be cataclysmic, particularly for those bottling plants in the Southern US.
Surely, this tactic would be fully endorsed by former Mexican President, Vicente Fox, who has no love loss with POTUS, and under whose term the ban was originally proposed.
Not My Circus, Not My Monkeys
Enraged, POTUS might completely disregard Appellations of Origin, in general, and not just Mexico’s.
He could allow micro and craft distillers across the country to make American tequila, mezcal, sotol, champagne, Bordeaux, and anything else that is protected by geographic indicators, triggering international incidents.
Pernod Ricard, maker of Avión and Olmeca Altos tequila, has already expressed its concern about this possibility.
51-49% cognac, anyone?
Don’t look now. It’s already happening.
Products like Three Wells from Tucson, Arizona, and the controversial Besado
calling itself “tequila” are already capturing the public’s attention, and commanding shelf space.
And, for the second or third time (we’ve lost count), South Africa is throwing its hat in the ring with its version of “tequila.”
Here’s a thought:
Maybe THIS is what Luxco was going for, after all?
This Way to the Egress
The way we see it, the CRT will have its hands full policing impostors on this side of the wall and abroad. But…
As Master Marketer, and P.T. Barnum expert, Joe Vitale says, “people will spend their last dime to be entertained,” and that includes their favorite agave spirits.
By the way, P.T. Barnum never said, “There’s a sucker born every minute.” Instead, he professed that, “There’s a customer born every minute.”
Be an informed customer.
Demand authenticity and transparency from your favorite agave spirit producer.
Don’t be a sucker.
[Tweet “Be informed: Demand authenticity and transparency from agave spirit producers.”]
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Cabo Wabo Blanco:
Just a Mixup at the CRT
If you have any further questions or clarification, please don’t hesitate to reach out to me.
In June 2009, just after Campari made San Francisco its North American headquarters, Skyy had 62 staffers, most of them based in the city, with a small production facility in San Jose and a few workers in home offices.
Skyy’s best-selling products include Skyy Vodka, Wild Turkey Bourbon, Skyy Infusions (vodkas infused with natural pineapple, ginger, citrus, passion fruit, grape, cherry and raspberry), Campari and Cabo Wabo Tequila.