It is no secret that tequila has been getting much more popular during the last years than it ever was before, and new markets are booming, becoming rich opportunities for producers of the spirit. Such increase in consumer demand is causing a rise in tequila and agave prices, and since agave plants take around 8 to 10 years to mature and be used for tequila production, the plant is getting more expensive than the spirit itself. However, agave is 60% of the tequila making process, which has resulted in a decrease in profit margins for tequila companies.
According to ISCAM, a Mexican company that tracks, documents, and analyzes prices of goods and market trends, the average price of tequila bottles has increased 23% in comparison to the price of bottles from 2015. ISCAM reports that the average bottle now costs around 438 Mexican pesos, which is around US$23. Of course, there is a very wide range of prices out there, depending on the brand and type of tequila, and the store you buy it at.
As we mentioned before, the tequila market has been growing steadily during the last couple of years, with countries like China and the United States being some of the most interested countries in the spirit. However, tequila is not the only product that is being increasingly popular. Agave syrup is also becoming internationally popular, as it is a healthy and tasty sweetener that works great as a sugar substitute. Therefore, we can expect agave and tequila prices to keep increasing in the near future.
Many companies have started to experience this pressure on profit margins, including José Cuervo, Don Julio, and Herradura. The rise of agave prices represents a big challenge for the spirit industry since the plant presents 60% of the tequila making process. As a result, profit is decreasing, even when prices of tequila keep rising, with an average decline of around 50% during the last five years. Nonetheless, sales keep going up and up, so the balance between costs and profits is slowly balancing out again.
As a matter of fact, several tequila companies have shown a slow but steady increase on sales, which is helping them make up for the declined profit margins. Mexico´s National Statistics and Geography Institute, or INEGI, reported that tequila companies produced 85.5 million liters of tequila during the first quarter of 2019 alone. This represents an increase of almost 50% against the same period of 2014.