Mexico encounters tequila predicament

(MENAFN) Mexico is facing a significant tequila surplus, with more than 500 million liters of unsold inventory, according to the Tequila Regulatory Council. In 2023, the country produced around 599 million liters of tequila, but by year’s end, about one-sixth of this amount remained unsold, leading to a glut nearly equal to the annual production. The surplus has been attributed to a decline in demand from the US, Mexico’s largest tequila market, and fears of potential tariffs under President-elect Donald Trump’s administration.

The US accounted for 80% of Mexico’s tequila exports, but in the first half of 2024, tequila consumption in the US dropped by 1.1%, a stark contrast to the 17% increase in 2021. Analysts suggest that the slowdown is due to a post-pandemic market shift and rising prices, which have led to reduced consumer consumption.

Trump’s threat of imposing a 25% tariff on Mexican goods, including tequila, adds to the industry’s struggles. The Tequila Regulatory Council's head, Ramon Gonzalez, warned that such tariffs could harm both Mexican producers and US consumers. However, the likelihood of these tariffs being enacted remains uncertain, given the significant US investment in the tequila sector.

Additionally, the overproduction has caused the price of agave, the drink's key ingredient, to drop drastically, impacting agave farmers. To combat this, some tequila brands are lowering prices to boost demand, while the industry is also exploring alternative uses for agave, such as producing syrups, biofuels, and compostable bags to alleviate the surplus.

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