Mexico Faces Tequila Crisis with 500 Million Liters of Unsold Inventory
Mexico is presently sitting on an significant surplus of tequila, with over 525 million liters of the long-lasting Mexican spirit sitting in stock at the near of 2023. This surplus has emerged because of falling call for within the u.s.a., which has historically been the biggest client of tequila. in step with a report by means of the financial instances, this surplus is expected to create a challenging 2025 for the industry, as plenty of the newly distilled tequila is not being offered, leading to an accumulation of unsold stock.
U.S. Decline in demand for Tequila
the us has long been the driving pressure at the back of tequila’s international recognition, with U.S. customers’ urge for food for tequila growing swiftly over the past decade. This surge in call for changed into similarly boosted by way of celebrity-backed manufacturers like Kevin Hart’s Gran Coramino, Kendall Jenner’s 818 Tequila, and George Clooney’s Casamigos, which helped gas a tequila renaissance.
however, within the past 18 months, U.S. call for for tequila has began to sluggish down. A combination of factors has contributed to this downturn, consisting of a decline from the pandemic-generation spirits increase and customers lowering their alcohol consumption in reaction to higher expenses. In 2024, sales of spirits within the U.S. dropped 3% inside the first seven months compared to 2023, with tequila intake falling via 1.1%. that is a stark evaluation to the explosive growth of tequila in the years prior, such as a 17% upward push in 2021 at the height of the tequila surge.
The excess of Tequila and charge changes
despite the hunch in demand, tequila manufacturing has persevered at excessive stages. ultimate yr, nearly 600 million liters of tequila were produced in Mexico, but handiest about 84% of this turned into offered. With a extensive part of tequila growing old in barrels rather than being bottled or bought, Mexico now faces an unsold stockpile of extra than 525 million liters, which represents one-sixth of the full tequila produced. huge tequila manufacturers have commenced to cut expenses in response to weaker consumer demand, similarly exacerbating the trouble.
Tequila producers, specifically the smaller manufacturers, are feeling the financial strain because the rate of blue Weber agave, the primary aspect in tequila, has dropped sharply from approximately 30 pesos per kilo to as little as two pesos instantaneous marketplace. This steep decline in agave expenses is a end result of the oversupply of tequila, as producers at the moment are grappling with unsold stock.
The Tariff threat Looms massive
Compounding the scenario is the looming hazard of price lists on Mexican exports to the U.S. below President-opt for Donald Trump, who previously counseled implementing a 25% tariff on goods imported from Mexico. If those price lists are enacted, it may in addition reduce the call for for tequila inside the U.S., which already debts for eighty% of Mexico’s tequila exports. this would no longer best hurt manufacturers in Mexico however additionally power up the value of tequila for American purchasers, creating a ripple effect throughout the whole supply chain.
Tequila is a product blanketed by way of a designation of foundation, similar to French champagne or Italian Parmesan cheese, because of this that it can best be produced in particular regions of Mexico, by and large in Jalisco and components of Nayarit, Michoacán, Guanajuato, and Tamaulipas. For a product to be categorised as tequila, it need to be made from as a minimum fifty one% blue Weber agave, and for certain premium classes like blanco or silver, the sugars have to come solely from blue agave.
International impact and the destiny of Tequila
The tequila industry is dealing with a crossroads. at the same time as it has loved years of boom, specifically inside the united states, the future looks unsure as numerous factors integrate to create a challenging marketplace environment. the excess of tequila, coupled with the chance of price lists and a decline in client call for, poses a critical risk to the livelihood of each tequila producers and agave farmers in Mexico.
With tequila’s international popularity on the road, producers may additionally want to reconsider their techniques. whether or not thru reducing fees similarly, diversifying export markets, or that specialize in top class merchandise, the tequila enterprise will have to adapt to the changing panorama of worldwide alcohol consumption. however, if the demand maintains to fall and surplus inventory persists, it could take years for the industry to recover from what may be a tequila disaster.
