On Jan. 22, 2018, a particularly savvy tequila brand owner announced in a private message to this office:
“Agave prices out of control. $22/kilo. Industry getting destroyed!”
Coincidentally, earlier that same day, another brand owner/ambassador admitted to us that the current cost had blown up to $24/kilo.
That savvy brand owner then added to his message–
“…but Cuervo started it. Bought up a ton of [agave] before their IPO. Increase balance sheet. That’s, at least, the word on the street.”
But, shit got REAL for Jose Cuervo when…
Cuervo Cries Wolf
In this El Financiero article dated December 21, 2017, Francisco Beckmann Vidal, owner of Tierra de Agaves and Jose Cuervo, warned of a looming agave shortage. He…
“…urged agave producers to increase plantings because whether in tons or in number of agaves, the industry requires more of your prime material. Planting must begin now. Eyes have to be opened and decisions need to be made. Only the industry can provoke the necessary changes.”
[“…instó a los productores agaveros a que incrementen los plantíos porque tanto en toneladas o en número de agaves la industria cada vez requiere de más de sus materia prima, “hay que empezar a plantar desde ahorita. Hay que abrir los ojos y tomar decisiones. Solamente la industria es la que va a provocar estos cambios que se necesitan hacer.”]
Like Shaggy said–
It wasn’t me!
Here’s Your Sign
All the signs of an impending shortage were there. Major spirits distributors, tequila and even mezcal brands jockeyed for position in the Agave Triple Crown race.
[Tweet “The Agave Panic of 2018: Bloodshed on the Streets of Tequila”]
In 2015, Diageo, the world’s largest producer of spirits, swapped its Bushmills Irish whiskey brand for Don Julio, previously owned by José Cuervo.
After Cuervo’s early February 2017 initial public offering, Davos Brands acquired a controlling interest in Master Sommelier Richard Betts’ Sombra Mezcal and Astral Tequila brands, in March.
Then, in early June 2017, spirits and wine behemoth, Pernod Ricard, purchased a significant stake in founder Ron Cooper’s beloved Del Maguey Single Village Mezcals amid uproar from long time fans claiming “sell out.”
Later that June, in a surprising move, Diageo bought Casamigos tequila, co-founded by celebs George Clooney and Rande Gerber, for up to $1 billion.
All this time, Bacardi, lurking like a shark in the water, in January 2018, bared its jaws and swallowed up Patron for a reported $5.1 billion.
Pernod Ricard, in an attempt to get the last word in January 2018, shelled out the big bucks to purchase the remaining 16% of Ken Austin’s Avion tequila that it had invested $100 million in back in 2014.
M & A was the name of the game in the spirits distribution sector, too.
Late November 2017 brought the news that distributor Breakthru Beverage was set to combine with Texas based Republic National Distribution Company to match 2016’s mega-merger of Southern Wine and Spirits with Glazer’s, Inc.
Real, or Fake?
Some skeptics still don’t believe that an agave shortage exists.
Unlike the more seasoned, and–dare I say–older sippers, this may be the first time Millennials and Gen Xers have ever experienced a truly severe Agave Crisis.
Others completely ignore the fact declaring an upcoming tequila boom, instead, instigated by the Big Three named above.
Even in this article in the Spirits Business, Vinexpo, the leading wine and spirits trade show, and IWSR (International Wine & Spirits Research) predict that:
“The fastest-growing spirit category in terms of volume will be Tequila, which is predicted to increase by 118% between 2016 and 2021 to 35m cases.”
Thank You, Captain Obvious
We told you last year this was coming.
Weren’t you paying attention?
In the article The Agave Shortage of 2017 Is Worse Than We Thought we outlined the reasons for the then looming crisis.
Still, you bought ALL the tequila and mezcal you could drink, didn’t you?
The Numbers Don’t Lie
According to DISCUS, 17.2 million cases of tequila were sold in 2017. 3.2 million of those cases were in the pricey Super Premium category, alone.
Must have been a good year for some of you.
On the Mexico side of the border, things aren’t so rosy.
According to these articles in Joe , Telam , and Reuters—
“This year , a total of 42 million agave plants were projected to supply 140 registered companies. However, only 17.7 million of those planted in 2011 are ready to be harvested, the Tequila Regulatory Council and National Tequila Industry Chamber have said.”
That’s assuming producers are using full grown agave. As explained in the above articles–including our own–2 to 4 year old immature agaves are being sold, as well.
With the use of diffusers by the large producers like Sauza and Bacardi (Cazadores), the age of agave plants used to make tequila is irrelevant.
About Those Stolen Agave
For several years, now, growers in Oaxaca had reported that truckloads of stolen (or purchased) espadin used to make mezcal were headed for tequila distilleries in Jalisco.
Now, a reported 15,000 blue agave plants have been hijacked from blue agave growers supplying the Big Boys. That’s triple the amount reported in 2016.
It is presumed that these pilfered plants were going to los mieleros (Big Pharma) since they pay bigger bucks for blue weber agave.
So, there is some poetic justice during this Agave Crisis.
The Blame Game
As much as major metropolitan areas would like to believe that they carry this much clout, cities like New York are NOT to blame.
On the other hand, brands like Houston based Pura Vida blames the Big Guys, too.
Austin based Dulce Vida tequila agrees.
And, one more for good measure from this small brand owner via LinkedIn on February 5, 2018:
[“The sad reality for small producers that depend on purchasing ripe agave that results in extraordinary 100% blue agave tequila is that the Large Makers are the ones who have stockpiled huge quantities of premature agave. But the 4 year old plants don’t yield good tequila. Moreover, it requires double the amount of prime material [agave] for the production of tequila. In short, the very same Large Producers have aggravated the problem and devastated the cultivation of blue agave.”]
While we’re pointing fingers, let’s accuse the real culprit of this economic and agricultural mess, shall we?
In October 2017, we spoke to Master Distiller of G4, Terralta, and Pasote–and agave grower–Felipe Camarena.
Minutes before the VIP Hour of El Cholo’s yearly Tequila Tour began, he briefly outlined to me in simple mathematical terms, how much per kilo he’d require to make a nice, honest living growing agave.
The amount was not unreasonable. In fact, it was in the single digit range.
By waiting at the last minute, and selling to the highest bidder, Camarena blamed the greed of amateur agave growers for the skyrocketing maguey prices.
How long will this agave crisis last?
In January 29, 2018, Master Distiller of Tapatio and Tequila Villa Lobos, Carlos Camarena, gave this gloomy prediction:
What… Me Worry?
Not everyone is worried, however. Pernod isn’t…
And neither are George and Rande. Having pocketed their nearly $1 billion, they’re venturing into mezcal, now.
Be VERY afraid!