Falling demand for tequila in the United States has left Mexico’s producers of the spirit with a surplus of unsold inventory, according to a Saturday report in the London-based Financial Times (FT).
Coupled with the prospect of tariffs being slapped on exports to the U.S. under President-elect Donald Trump, tequila’s glory days in the United States seem to be in peril.
“The tequila industry is set for a very turbulent 2025,” Trevor Stirling, an analyst with the financial management firm Bernstein, told FT.
“Much more new spirit is being distilled than is being sold, and inventories are starting to accumulate,” he added.
Half a billion liters of surplus tequila in storage
According to FT, Mexico was sitting on more 525 million liters of tequila in inventory at the end of 2023.
Also, about one-sixth of the 599 million liters of tequila produced last year remained in inventory — according to figures shared with FT by the Tequila Regulatory Council (CRT) — although some of that is being aged in barrels rather than waiting to be bottled or sold.
U.S. consumers’ thirst for tequila has grown rapidly over the past decade, in part due to a host of celebrity-backed brands such as comedian Kevin Hart’s Gran Coramino, model-influencer Kendall Jenner’s 818 Tequila and actor George Clooney’s Casamigos.
Another such brand, Santo — founded by celebrity chef Guy Fieri and rocker Sammy Hagar — was reportedly victimized by a heist in the U.S. last month that netted the thieves more than 24,000 bottles of the stuff.
Despite the robbery, demand for tequila in the United States has fallen over the past 18 months, with FT citing two reasons: a decline in the pandemic spirits boom and imbibers cutting back on their drinking due to higher prices.
FT wrote that sales of spirits in the U.S. shrank 3% during the first seven months of 2024, compared to the same period in 2023, based on data provided by IWSR, a leading analyst of the global alcoholic beverage industry.
IWSR, which originally stood for the International Wine and Spirits Record, noted that U.S. tequila consumption fell 1.1% during that span — well below its 4% rise in 2023 and 17% rise in 2021 at the height of the tequila surge, FT reported.
The volume of tequila exported from Mexico reached an apex of 418.9 million liters in 2022, marking the 13th straight year of growth.
Over that span, tequila exports from Mexico increased by 207% — and since 1995 the increase was a whopping 548%.
However, the export volume dipped to 401.4 liters last year, according to data from Statista.com, a 4.2% dropoff from 2022.
Tariffs threaten to deepen the tequila slump
Adding to the emerging tequila slump is Trump’s threat to hit Mexico, the U.S.’s biggest trading partner, with a 25% tariff on its goods.
“It would be shooting themselves in the foot because their consumers would have to pay much more,” said CRT president Ramón González.
FT noted that Mexico relies on the United States to buy 83% of its exports.
Two-thirds of all tequila produced in Mexico was exported in 2023, FT reported, with 80% of that going to the United States. The next two largest export markets were Germany and Spain, with about 2% each, according to FT.
Tequila is protected by a designation of origin. Like French champagne or Italian parmesan cheese, products using the name tequila can be produced only in regions officially recognized by the Guadalajara-based CRT: most of Jalisco and parts of Nayarit, Michoacán, Guanajuato and Tamaulipas.
In addition, tequila must be made of at least 51% blue Weber agave, with an added requirement for “agave tequila” (such as blanco or silver) that all sugars come from blue agave.
Citing research by Bernstein, FT noted that large tequila brands have been cutting prices for more than a year in response to weaker consumer demand.
Moreover, the price of agave has plummeted from about 30 pesos per kilo to between six and eight pesos (for suppliers with contracts), or as low as two pesos on the spot market, according to producers and farmers, FT wrote.
With reports from Financial Times and Reuters
