Tequila vs Mezcal: The Director’s Cut

Skepticism and Terror

Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57m

In early June 2017, I was interviewed via email by VinePair’s conscientious staff writer, Nickolaus Hines, on whether I thought that mezcal could “…Grow its way to the Mainstream Without Losing its Roots.”

Skepticism usually sets in whenever we’re approached for quotes by writers attempting to compose complex articles about the plight of agave spirits.

Skepticism turns into sheer terror whenever the writer represents a website that is not known for its thoughtful content.

More often than not, facts get muddled and the same old tequila cliches are regurgitated.

Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57m

Such was not the case here.

Director’s Cut

Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57m

When interviewing several people at once to create a relevant article, it’s a rarity for a journalist to be able to use all of the interviewee’s replies to produce a coherent final piece.

It’s a common practice in the movie industry to edit a character’s scenes only to later add them back in.  It’s what becomes the Director’s Cut once the movie is available to buy or rent.

What follows are the exact questions Mr. Hines asked, and my answers, including what wound up on the cutting room floor.

***

NH:  Was there a defining moment that you’re aware of when tequila became a mainstream spirit in the U.S.?  Did it have to do with a multinational liquor company’s investment?

Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57mMM:  For me personally, it was when the sale of Herradura tequila to Brown-Forman was announced in late 2006 (and subsequently finalized in January of 2007).

Jose Cuervo’s Especial and 1800 “mixto” brands (51% agave, 49% other sugars) had been mainstays in clubs and restaurants for decades prior to that, mostly consumed in shots and margaritas.  At that time, 100% de agave tequilas like Chinaco, El Tesoro de Don Felipe, and Herradura Blanco Suave, were out of most people’s price ranges, and sipping them was a foreign concept.

I had visited Herradura’s historic San Jose del Refugio distillery earlier in 2006, and was shocked to hear news of its sale to B-F, a transnational corporation.

I knew then that things would never be the same.

NH:  How has tequila becoming a mainstream spirit impacted tequila producers?  Is it harder than ever for small and independent producers, or is it easier because consumers are more familiar with tequila in general?

MM:  According to the Distilled Spirits Council of the United States (DISCUS), tequila volumes have jettisoned 121% since 2002.  Much of this consumption is due to multinational corporations and their massive distribution, sales and marketing channels.

As of the current Consejo Regulador del Tequila’s (CRT) NOM list (dated May 31, 2017), there are 1373 brands of tequila being produced by roughly only 130 distilleries.  Most are what are called “maquiladoras,” that distill tequila for various brand owners.

Small and independent craft tequila producers, as well as reputable small-to-mid-sized maquiladoras are few and far between, but they do exist.

Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57m

Most don’t have the funding, marketing budgets and distribution channels that the Big Boys have, so they struggle to compete on a level playing field.

Constant and consistent education of the average consumer by smaller brands of their quality is a key component to their success, and vital for their continued existence in the marketplace.

NH:  Mezcal has less restrictions on where, with which types of agave, and how it can be produced than tequila does.  Is that an advantage that could make mezcal as popular (or more) than tequila?

MM:  Actually, like Tequila, Mezcal has a Denomination of Origin.

It is currently produced in the Mexican states of Oaxaca, Durango, Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57mZacatecas, San Luis Potosi, Guanajuato, Guerrero, and Tamaulipas.  Michoacan has also been recently admitted, and many other states are expected to be added in years to come.

Because several other types of agave can be used to distill mezcal (as well as bacanora and raicilla), unlike the singular blue weber agave from which tequila must be produced by law, that is its main attraction to consumers.

The fact that it is relatively new, unusual, has a story behind every bottle and batch, and is arguably the most artisanal product in the world, makes mezcal particularly attractive to Millennials and connoisseurs alike.

The danger is that these characteristics COULD, indeed, make mezcal even more popular than tequila.

NH:  Does the rise of tequila provide a blueprint for mezcal, or is the intended consumer base too different?

MM:  The rise of tequila does provide a blueprint for mezcal, but not in the way you think.  The Mezcal Industry has shown that it has learned from the mistakes made by the Tequila Industry.

In February 2017, the Mezcal Regulatory Council passed into law an amendment to its normas that would categorize mezcal by its methods of processing (mezcal, mezcal artesanal, and mezcal ancestral).

These new categories will allow for small producers to continue making mezcal their way, and for large, multinational corporations to attempt to mass produce juice that can still be labeled mezcal.

Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57m

Unlike the Tequila Industry, where consumers who are tired of the same cookie-cutter flavor profiles of the more popular brands, and are desperately seeking authenticity and quality, this type of transparency lets all consumers choose for themselves which type of mezcal best suits their tastes.

NH:  Where do you see the mezcal business in 10 years?  Will it be mostly owned by multinational corporations, or will smaller companies retain control?

Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57mMM:  The above mentioned new law will presumably allow both large and small producers to thrive, but mezcal finds itself in a conundrum: 

That is, how to simultaneously protect the industry for future survival while meeting the burgeoning global demand.

Aside from the more commercially grown espadin variety, many of the more sought after agave are wild harvested and take years to mature.  As I mentioned in question #3, the different types of agave used for mezcal is the attraction, but could also lead to its demise.

Unless sustainability and preservation of all types of agave–and the cultural and economic well being of the communities in which mezcal has been historically distilled for decades–is part of any business plan (especially by transnational corporations), then the Mezcal Industry is doomed and the collateral damage could be devastating.

NH:  Is there anything that happened to small tequila producers and small villages where tequila is made that you believe could happen to small mezcal producers small villages where mezcal is made?

[Tweet “Sustainability/preservation of #agave by trans corps a MUST or #mezcal is doomed.”]

MM:  Tequila and mezcal don’t share parallel histories.

When Jose Cuervo was granted permission by the Spanish Crown to commercially produce tequila in the mid-18th century, distillation of mezcal (or pulque) was legitimized (taxed) and refined for the aristocracy.

Throughout tequila’s over 250 year history, several other clans emerged as wealthy landowners settling in various regions, growing their own agave and establishing family brands.

Tequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57m

The tequila industry charged forward when the Sauza family first exported tequila, then known as vino mezcal, into the United States in the late 19th century.

When the Sauza’s sold the brand in the late 1980s to Spanish brandy maker Pedro Domecq, it signaled that the industry was open to foreign interests, mergers and acquisitions.

Over several decades, some small commercial agaveros (blue agave farmers) made their fortunes during times of severe agave shortages.  With their newfound wealth, many started their own brands and constructed distilleries.

Mezcal, on the other hand, had continued to be clandestinely produced all this time by indigenous people in rural areas of Mexico.  It had remained largely unchanged.

While tequila struggled to elevate its image throughout the 20th century from a poor man’s drink, to a party shooter, to an elegant sipper, mezcal’s has always been akin to white lightening.

Its booming popularity in the 21st century has only proven how everyTequila vs Mezcal: The Director's Cut http://wp.me/p3u1xi-57m facet of mezcal production—from commercial farming of espadin and other agave, to mass production and even regulation—is still in its infancy.

Mezcal can no longer be ignored, though.

The recent positioning by multinational companies capturing significant stakes in popular and pioneering brands has now made mezcal a valuable asset to any spirits portfolio.

It remains to be seen, however, whether anybody outside of these transnational corporations gets rich from distilling mezcal.

NH:  Is mezcal as scaleable as tequila?

MM:  Not at the present time.

Can it be?  Sure.

But concessions by the Mezcal Regulatory Council would have to be made, for instance, by allowing for the distillation of “mixto” mezcal.

Tequila’s Denomination of Origin is currently the only one in existence that is allowed to be adulterated by the production of mixto.

[Tweet “Tequila’s Denomination of Origin is the only one allowed to be adulterated.”]

I doubt seriously that the Mezcal Industry would agree for its DO to be bastardized in this way.

~~~~~~~~~~

Learn all about tequila from field to glass and then get paid to share your love of agave spirits with others! Buy Them Both Now!

Craft Tequila–WTF Does THAT Mean? Part 2

Blurred Lines

Throughout Part 1, we employed the use of more adjectives and descriptors to define, describe and distinguish one booze from another in the same category, as well as to give the illusion that it is actually closer to another booze in the leading categories.

Words like award-winning, artisanal, small-run, limited-production, hand-crafted, and boutique are reused over and over.  So are micro-distilled, limited edition, small batch, small lot, organic (which we’ll cover in-depth in a future article), single village, homespun, authentic, small-lot, prestige, signature, high end and reserve.

They all have real core meanings, but because we see them repeatedly in ads, billboards, packaging, shelf talkers and point of sale (POS) materials, the lines between meaning and true definitions get blurred.

Has anyone actually ever been to Los Camachines, where Gran Centenario is made?
Has anyone actually ever been to Los Camachines, where Gran Centenario is made?]

For instance, the definition of the word premium as defined by the Distilled Spirits Council of the United States (DISCUS) is actually a pricing term.  To the average consumer, however, it has come to mean quality.  And when consumers’ buying habits change and trade up, it has become known as premiumization.

There’s no chance of spirits marketers discontinuing the use of the Tequila Marketing Myth of borrowing benefits any time soon.  How, then, do we really define and measure a craft tequila?

[Tweet “How do we really define and measure a craft tequila?”]

We’ll show you how in a moment, but let’s get two things straight right here–

Remember Fact #1?  Tequila belongs in Mexico.

Though some American micro-distilleries have attempted to distill small batches of agave spirits, it has proven difficult and labor intensive due to it being produced from a plant that takes years to mature as opposed to grains, hops, and grapes that yield more frequent harvests.

It would be silly to define and measure craft tequila in ways that relate to wine, beer and other spirits created in the United States and abroad.  There may be no boundaries in spirits marketing, but to impose limits on the number of barrels, bottles and cases manufactured and sold by a tequila distillery in order to measure a craft product would have no jurisdiction whatsoever in Mexico.  Secondly–

There Is No Backpedaling

The Beer Wench, Ashley Routson said it best when interviewed for this article:

“No one wants to fault the big guys for being successful–that is not what this argument is about.  My main question is–how big is too big?  And as long as a company stays independently-owned, does that mean it will always be craft?”

[Tweet “As long as a company stays independently-owned, does that mean it will always be craft?”]

Indeed, both the craft beer and spirits segments are growing at such a fast rate, that the Brewer’s Association has changed its definition multiple times.   This has allowed the burgeoning brewers more room to expand.  And as spirits writer, Wayne Curtis, discusses in this article from The Atlantic, the alarming growth rate of small distilleries is having an effect on the quality of the finished craft product due to a shortage of experienced distillers.

[Tweet “Does small mean craft? More small distilleries means more inexperienced distillers.”]

As a consequence of this exponential growth, in both the craft beer and craft spirits categories, the process–the art form itself–is getting watered down.

*Rant Alert!*

Let’s face it–

No backpedaling!
No backpedaling!

No one gets into the tequila business to be a failure.  Everyone wants to be on top.  And once you get there, the challenge is to stay on top.  We know how arduous the tequila hero’s journey is.

No one with a business plan ever said, “I’m going to mass produce my lousy tequila and once I’ve flooded the shelves with my swill and lost market share, I’m going to distill a tequila the old fashioned way.”

Don’t pretend to continue to still make your tequila like you have over the past 250 years, either.  You are not that home based family operation still harvesting agaves by mule and macerating piñas with a tahona, any more.  That family’s history was forgotten when the brand was sold.

And just because you build a separate, smaller facility on your distillery property to produce a more labor intensive line (and even petition to do so under another NOM number!) when you have never attempted to do so in the first place, does not make your more expensive line a craft tequila.

[Tweet “Build a token distillery, get a fresh nom number and call it craft? Rubbish!”]

Moreover, just because you happen to be a colossal consumer of agave, still being emulated for your unique style of 80’s spirits marketing, and prefer to see things differently, don’t expect the rest of us to swallow your slant.

[Tweet “Don’t market tequila like you did 20 years ago. We won’t believe you.”]

The Craft Tequila Gauntlet

El Tesoro handmade tequila.
El Tesoro handmade tequila.

Following are some tips and suggestions that may help guide you in making more informed decisions when selecting, defining and measuring a craft tequila.

#1:  NOM list

By Mexican law, every tequila must display a number that corresponds to the legal representative, tequila producer or distillery in which it was produced.  Tracing that number to the CRT’s list of distilleries, you can discover what other brands are manufactured under that specific number, and presumably, in that specific factory.

Logic dictates that the fewer labels a fabrica (factory) produces means more care should be taken with its one or two flagship brands.  Logic also dictates the opposite when you see many different brands appearing under a particular NOM number.

Whether the distillery produces only a few lines, or many contract brands for others, is not necessarily a sign of the tequila’s craftiness or quality, but it’s a start.

You can view and download the most recent NOM lists from our website here.

#2:  Pedigree

[Tweet “a craft brand with a good chance of survival in the market will be …”]

Don Felipe Camarena
Don Felipe Camarena

Taking a pointer from panel expert, Chriz Zarus’ now industry classic article, “Change is at Hand for the Tequila Market, Part II,” a craft brand with a good chance of survival in the market will be one that “You, your distillery, and your brand have generations of lineage.”

Meet-the-Maker dinner pairings, industry meetings and on-premise tastings showcasing a craft tequila will more than likely feature the brand owner or the master distiller behind the brand.

In some cases, a well respected Brand Ambassador (not the gal or guy with the tight t-shirt!) will stand in for the owner if there is a scheduling conflict.

Again, this is not a guarantee of craftiness or quality, but most family owned brands will stand behind (or in front) of their tequila with pride.

[Tweet “Most family owned brands will stand behind (or in front) of their tequila with pride.”]

#3:  Distillery ownership/partnership/co-op

Another tip from Zarus’ treatise that could be useful in determining whether a craft tequila will be successful or not is, “Your company does…own at least a portion of the distillery that produces your product.”

This was successfully accomplished by the owners of Suerte Tequila, one of the few still produced with a tahona (milling stone).  In order to ensure the quality of their tequila and to regulate the brand’s eventual growth, Lance Sokol and Laurence Spiewak purchased the distillery.

Does your craft tequila have some skin in the game?  Most good ones do and will proudly make that information public.

[Tweet “Does your craft tequila have some skin in the game?”]

#4:  Agave and land ownership

Similar to #3 above, some craft brands are owned by families with ties to the land and own their own agave.  In some instances, they may or may not own all or a portion of the distillery where they produce their tequila.

In the midst of this current agave shortage, this one asset could make or break a craft brand.  This information should be readily available in POS material, but is also not a guarantee of quality or craftiness.

#5:  Use of a Diffuser

While considered a legitimate tool in tequila production efficiency and has the full blessing of the CRT, it is a dead give away that shortcuts are being taken.

As noted agave ethno-botanist, Ana Valenzuela so succinctly declared in this open letter…

“…prohibir el uso de difusores (hidrólisis de jugos de agave) que les quita “el alma” (el sabor a agave cocido) a nuestros destilados, únicos en el mundo por su complejidad aromatic y de sabores.”

[“…to prohibit the use of diffusers (in hydrolysis of agave juices) that takes the “soul” (the flavor of baked agave) out of our native distillates, singular in the world for its complexities of aromas and flavors.”]

[Tweet “Can a diffuser tequila be considered a craft tequila?”]

El Tesoro's tahona, still in use.
El Tesoro’s tahona, still in use.

This is also in keeping with Zarus’ definition of preserving the process as the art form or craft outlined in Part 1.

Using a diffuser is a closely guarded secret by most mid-sized to large distilleries and hard to spot.  You can read more about them here.

#6:  Organic

If there are any products that deserve to be described with the aforementioned adjectives that spirits marketers are freely throwing around these days to denote a handcrafted tequila, mezcal, or other agave distillate, they are in the organic segment.

Stringent regulations are required in both farm to distillery, and then from factory to bottle, to be given the designation organic and the permission to use the USDA seal that appears prominently on the labels.

By virtue of being organic, the process is considered much more natural and is inherently small batched.

[Tweet “Can we automatically consider organic tequila “craft” tequila?”]

But, not every brand has the budget to become a certified organic tequila.  In addition, some brands may simply not see the value of being certified as organic, especially since some organic certifying agencies have been looked upon distrustfully in recent years.

Still, it could arguably be the most reliable indicator of a craft agave distillate.

#7:  Transparency

This might be the toughest test of all.

As we mentioned above, many brands prefer to play their cards close to the vest.  By the same token, many family owned brands are fiercely proud of their origins and will gladly tell you the truth, the whole truth, and nothing but the truth.

Is your craft tequila brand willing to tell you their story, or just tell you a story?

[Tweet “Is your craft tequila brand willing to tell you their story, or just tell you a story?”]

Many of the more popular craft tequila brands are helmed by creators who are delightfully flamboyant and outspoken, as well.

 Craft by Any Other Name

As our reader in Part 1 stated, the meaning of craft is “all over the place” and then some.

Spirits marketers using their powers for evil.
Spirits marketers using their powers for evil.

With mixology being the leading trend driving the spirits industry and demand for better ingredients on the rise, this means quality tequila is essential for those creating crafted cocktails (there’s that word again!).

But, with  the invention of the wildly popular michelada cocktail, a margarita (which is the favorite way Americans consume tequila) served with a beer bottle upside down in a margarita glass, and chilled tequila on tap, there will surely be more cross pollination between adult beverage categories.

We’ve already seen this with tequila brands selling their used aging barrels to small brewers to create signature craft beers, as well as tequila aged in barrels bought from other brand named spirits.

This will only lead to even more crossovers between categories caused by inspired spirits marketers, PR firms, uninformed spirits journalists, and multinational corporations.  Borrowing benefits has been the norm for some time.

There will always be those who deliberately hide the truth or feed false information to the media and practice opacity.  We can’t control what they will say and do.

The key is to become educated and informed about a tequila’s recipe and process.  Using the Craft Tequila Gauntlet above can certainly help in making the right choices.

[Tweet “Using the Craft Tequila Gauntlet can help in making the right buying choices.”]

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~~~~~~~~~~

Learn all about tequila from field to glass and then get paid to share your love of agave spirits with others! Buy Them Both Now!

Change is at Hand for the Tequila Market, Part I

tequila market, masa azulPart I of II

Written by Chris Zarus of TequilaRack

Tequila Brands and Producers Have Already Sailed Into the Sucker Hole

For those new to the expression, a “sucker hole” is a colloquial term referring to a spate of good weather that “suckers” sailors into leaving port just in time for a storm to resume at full force and wreak havoc on the ship and crew.

For both Tequila Brand Owners and producers of a certain size, their ship has already sailed, and the storm is now closing in on them. Some in denial, others looking through rose-colored margarita glasses, still believe they can navigate through to that glimmer of light on the horizon. However, the perfect storm of doom looms just past the horizon of hope, and will soon envelope and destroy most, if not all, in its wake.

[Tweet “Tequila Brands and Producers Have Already Sailed Into the Sucker Hole”]

Oh, and that’s the good news. The bad news is that only a few of the big and the very nimble will survive.

This is because of a number of factors, primarily that too many of us bought in to the Yankelovich and similar studies that declared premium and above 100% Agave Tequila brands as the next big thing.

While the premises of these market premonitions were undoubtedly true, too many of us jumped headfirst into the juice just before the world economic decline. Six hundred brands have turned into 1200 brands in less than five years. The growth of the market has been dramatic compared with other distilled spirits, yet, it’s still relatively small, ranked only 4th in US volume. It has not grown fast enough to accommodate all of the entries into the field.

[Tweet “Too many of us bought in to the Yankelovich study declaring 100% Agave Tequila brands as the next big thing.”]

Resistance is Futile – Change is at Hand for the Tequila Market

train wreckThe Gravy Train Wreck Ahead

I’m sure that for many of you, in just reading the title of this article, your blood pressure has escalated, and you may already be misdirecting your anger at the author.

For others who have experienced the many similar economic paths to consolidation in the global beverage industry, you have already accepted that change has to occur, and you will soon better understand and appreciate the math behind what I am about to lay out, and why everything I’m about to outline here will happen in due course.

For those of you who have your personal fortunes riding on the Tequila Train, both prominence and profit may still seem to be so close that you think you can see the light at the end of the tunnel, or beyond the next bend. But, I’m sorry to say that for most of us in the biz, the light at the end of the tunnel is that of an oncoming locomotive. This will be a catastrophic collision, albeit in slow motion, that will drain your resources and your resolve.

iwsrWhat can be learned from the Russians? (Excerpted from JustDrinks.com)

The global economic crisis has had a significant impact on the Russian spirits market, changing market dynamics and briefly halting the much-lauded premiumisation trend, according to current research.

A recently released report from the International Wine and Spirit Research (IWSR) on Russia’s spirits market claims that the downturn has also led to “…disruptions across the supply chain, with many suppliers and distributors going bankrupt or halting production. For healthier companies, however, it has presented an opening to establish their brands and take market share…”

cloud liningThe Silver Tequila Clouds have a very Dark Lining (Excerpted from Global market review of Tequila – forecasts to 2013 www.researchandmarkets.com )

The history of the Tequila industry has been one of boom and bust. Sales rose during the 1940’s only to collapse again in the mid-50’s. Export sales rose steadily from the 1960’s onward, although domestic sales fell sharply in the 1980’s due again to an economic slump, and the severe Mexican economic crisis of the early 1980’s resulted in plummeting sales.

The market was again disrupted by a critical shortage of Agave beginning in the late ’90’s, which served to hold back the category’s international development as brand owners were forced to divert limited supplies to the core US market, and quality perceptions were damaged as some manufacturers moved from 100% to 51% (Mixto) Agave products.

Today, that dynamic is in reverse, and the market is in oversupply. More and more 100% Agave products are coming into the market. This is helping to raise quality perceptions, and in turn, demand is surging not only in core Mexican and US markets but across a number of other countries.

The outlook for the category has rarely been better, and Casa Noble Tequila president and COO David Ravandi commented, “Tequila is entering a stage of consolidation in the world markets. It is no longer a fad. The fact that 100% Agave Tequila exports have increased tremendously over the last two years is extremely positive for the product’s outlook in the years to come.”

US Tequila Importation is a Sucker Bet

tequila history, santa fe“My cousin will make the best Tequila for you Mr. Gringo”

“So, my friend, you want a great Tequila brand? We will make it for you. Just fifty percent cash up front to start the process.”

Unfortunately, far too many have fallen for this old gag. Relying heavily on the forecasting reports of the early 2000’s that suggested that luxury Tequila would be the next big spirits category after vodka.

With dollar signs in their eyes, the believers drank the Tequila Kool-Aid, most of them spending way too much to buy a brand, custom molded bottles, etc. But the worst part was that this left little if any money for marketing. Many did not even understand brand marketing inflation was happening right under their noses.

It had started soon after Patron hit 100,000 cases in volume in 2001, and the cost to market a Tequila brand in the US went from $1 to $10M per year. Today it takes at least $20M per year just to play in the same ballpark as Patron’s $50M plus, Sauza’s $35M plus, and Cuervo’s $30M plus marketing budgets.

Who could have predicted that a “realistic” business plan for the next successful ultra-premium Tequila brand calling for only 10,000 cases in the first year would end in it’s investors taking a bath?

The problem with this equation is three-fold:

1) Pricing: Unlike vodka and white rum, 100% Agave Tequila is just too expensive to produce and bottle in Mexico. Unless, like rum, vodka and mixto Tequila, it is able to be shipped in bulk and bottled near the final consumer, the cost involved with 100% Agave Tequila is always going to be too high to attain critical volume and profit levels.

2) Volume: US mass volumes are best when a spirits category is between $9.99-29.99/750ml. One hundred percent Agave Tequila is currently profitable only at the upper ranges when higher volumes are attained.

3) Distribution: The US “3-Tier” Distribution System is at best an oligopoly, and 19 states run a monopoly. Of the 1200 plus Tequila brands, want to guess how many they want to carry? Well, after the top 20, you are very lucky to be “special order only”. If you are fortunate enough to live in the states of California or Arizona, where one can be both the importer and distributor, you will find yourself driving your precious Tequila brand around to each account in your car.

[Tweet “The US “3-Tier” Distribution System is at best an oligopoly, and 19 states run a monopoly.”]

Without product volumes or market clout, you will be hard pressed to get even an appointment, let alone a vender number with the chain restaurants and grocery stores. These major chain stores like Chili’s, Chevy’s, Costco, Kroger, etc., drive at least 85% of the combined volume in all but the control states. Without access to the chains, your market becomes the handful of privately owned, “Mom & Pop” accounts that usually know that small independent distributors are easy prey for bending the law on consignment, stringing out payments, or not paying at all.

While driving your own brand around certainly makes time for the personal touch and focus, these hand-selling efforts prove to be the most inefficient ways to distribute one Tequila brand. Your glass ceiling to fame and fortune becomes that next level of chain distribution that can only be had by a state-wide delivery system of the large wholesale distributor.

With Tequila segment Pricing, Volume and Distribution all against you, one will need to have a lot more money than the brands of the past in order to simply survive in the US.

Tanks-a-lot for Nothing

Call the tank maker and raise your stocks of liquid now!

no masUnfortunately, most of the mid-sized Tequila distilleries have bought into the notion that Agave prices will go up in the very near future. They base this notion on the boom and bust cycle of the past, and like Lehman Brothers, believe that they have successfully timed the market.

Greedily, many producers are now mortgaged to the hilt in order to produce all the Tequila that they possibly can afford to store in stainless tanks or wooden barrels. Fear of the impending Agave price increase that has yet to happen (and may not for many, many years) has seemingly forced them all into a squirrel-like stockpiling frenzy.

Are they storing Blanco, like acorns, for the hard winter ahead? These stored nuts of liquid demise are in reality winds conspiring to produce the perfect storm for all but the most financially secure and/or nimble producers.

Copyright 2010 International Tasting Group (ITG), All rights reserved. Unless otherwise noted, ITG is the legal copyright holder of the material on our blog and it may not be used, reprinted, or published without our written consent.

Links

SPIRITS TRENDS

U.S. Spirits Market 2008, Gross Revenues by Price Category

http://www.discus.org/pdf/2009IndustryBriefing.pdf (This is the most recent report by DISCUS for 2009. Tequila volume is still listed as 4th.)

http://www.thefreelibrary.com/Spirits+fast+track+brands.-a0144204154 (shows Patrón reaching 119K cases in volume in 2001.)

http://archive.cyark.org/2012-understanding-the-maya-calendars-blog

http://www.forgottenagesresearch.com/index.htm

http://www.nostradamus.org

http://www.oceanfreightusa.com/topic_impg.php?ch=19 (Bonded warehouses.)

http://dsc.discovery.com/news/2009/02/09/tequila-agriculture.html (agave farmers)

http://www.yankelovich.com/ (state of the consumer)

tequilarack

Originally posted October 1, 2010 by Chris Zarus of TequilaRack.  This is considered a standard in the industry and is even more relevant today.

Please visit TequilaRack, a member of the Tequila Aficionado Flight of Sites.

 

 

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