Mexico has accumulated about 500 million liters of unsold tequila due to falling demand in the US, which is the main market. The situation is exacerbated by potential tariffs on Mexican goods and falling agave prices. This is reported by the publication Financial Times, reports UNN.
Falling demand for tequila in the US
Demand for tequila in the US has dropped significantly, leaving Mexican producers with large stocks of unsold drink.
In particular, the prospect of the incoming President Donald Trump's administration imposing tariffs on imports of Mexican goods to the US threatens the golden age of tequila on the American market.
Financial company Bernstein analyst Trevor Sterling said that the tequila industry will face serious challenges in 2025.
According to him, more tequila is distilled in Mexico than is sold, leading to the accumulation of stocks.
Half a billion liters of tequila in stock
At the end of 2023, Mexico had over 525 million liters of tequila in storage. According to the Tequila Regulatory Council (CRT), about 1/6 of the 599 million liters produced last year remained in stock. Some of it is aged in barrels, but the rest is waiting to be bottled and sold.
Demand for tequila in the US has grown over the past decade thanks to celebrities creating their own brands. Among them are Kevin Hart's Gran Coramino, Kendall Jenner's 818 Tequila, and George Clooney's Casamigos. But over the past 18 months, consumption has fallen. The reasons were the decline in the "alcohol boom" during the pandemic and rising prices.
According to IWSR, in the first half of 2024, tequila sales in the US fell by 1.1% compared to growth of 4% in 2023 and 17% in 2021.
Decrease in exports
In 2022, Mexico exported a record 418.9 million liters of tequila, which was the peak of 13 years of growth. But in 2023, the volume fell by 4.2%, to 401.4 million liters.
80% of Mexican tequila goes to the US, which remains the largest market for producers. The next largest export volumes are Germany and Spain, which account for only 2% each.
Threat of tariffs and falling agave prices
The situation may worsen due to the planned imposition of 25% tariffs on Mexican goods. CRT President Ramon Gonzalez believes that this will harm both the Mexican and American economies, as American consumers will have to pay more.
At the same time, the prices for agave - the main ingredient of tequila - have fallen significantly.
While producers previously paid around 30 pesos per kilogram, the price is now 6-8 pesos per contract and up to 2 pesos on the open market.
Brand with protected origin
Tequila, like champagne or parmesan, has the status of a product with protected geographical indication. It can only be produced in certain regions of Mexico, including the state of Jalisco, parts of Nayarit, Michoacán, Guanajuato and Tamaulipas. The drink must contain at least 51% sugars from blue agave.
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