Tequila faces an uphill struggle despite its popularity

Related tags Tequila

Tequila sales have soared over the last decade but a shortage of the agave plant means the spirit faces an uphill struggle Few spirits in the UK have...

Tequila sales have soared over the last decade but a shortage of the agave plant means the spirit faces an uphill struggle

Few spirits in the UK have risen as meteorically as tequila over the last decade. Fuelled by a renaissance in all things Latino and a thriving shot and shooters culture among the 18 to 25-year-old market, the demand for the fiery Mexican spirit has exceeded all expectations.

In the UK last year, tequila sales reached an impressive 100,000-120,000 standard nine-litre cases compared with a 1986 figure of around 30,000, with approximately 60 per cent sold in the on-trade. Furthermore, industry observers have predicted 10 per cent annual growth for the category.

However, these perky predictions were made before the arrival in 1997 of the ominous Picudo del Agave - the lethal bug on a mission to kill, ....er, tequila. The threat of what Mexicans are calling "Tequila AIDS" has sent shockwaves throughout the global drinks industry, and the future of the drink remains unclear.

Approximately 30 per cent of agave, the cactus-like plant used to make tequila, has been affected and antidote chemicals strong enough to penetrate the thick waxy leaves have yet to be concocted.

This plague is just one of a combination of factors which has led to a huge jump in the price of the agave plants. In 1997, a freak snowfall annihilated a large portion of the agave plantations.

A global acceleration in demand for tequila has signalled a rise in price in the region of a staggering 800 per cent. Agaveros, the Mexican farmers who harvest agave, are currently charging £600 for a ton of agave - nearly 20 times more than last year's asking price, and are employing 24-hour patrols to protect their plantations from raids.

The crisis is even more acute due to the strict implementation of a 1998 EU ruling dictating that all tequila must be made with at least 51 per cent blue agave and must originate from a specific area of Mexico approved by the government. Although this has stemmed the tide of cheap flavoured drinks masquerading as tequila, it has led to rising costs.

However, despite recent claims from senior Mexican politicians that the shortage of the country's biggest export is set to worsen and warnings that prices are rising even higher, the major tequila brand owners, UDV, Seagram and Allied Domecq, are adamant that the UK market will be relatively unaffected.

As the news of the shortage has filtered through to the UK market, the respective suppliers of Jose Cuervo, (which dominates the tequila market with a 60 per cent stake), Olmeca and Sauza have all proudly announced the acquisition of secure plantations capable of providing a sufficient yield to ride out the crisis.

"Things are stabilising now and we've managed to secure enough agave to supply the demand in the UK," said Chris Nadin, international brand director for Jose Cuervo. "We've worked out what we need for each brand and can manage to supply the blends with no trouble at all," he added.

However, rivals have not been so immune to the effects of the shortage. Allied Domecq, producers of the Sauza brand, recently admitted that profits in the second part of this year would be damaged to the tune of around £8million by the crisis.

In order to secure a guaranteed supply from Mexico, Seagram was forced to replace its Montezuma Gold and Montezuma Silver brands as its chosen tequila in favour of Olmeca. "The prices have gone up considerably but we're trying our hardest to keep the change away from the consumer," said Mairi-Louise Sutherland, Olmeca brand manager. "We still have enough to supply demand. You have to remember that our plans in the UK are relatively small."

UK prices have gone up by around 12 per cent, but the inclination for slamming and shooting among the UK consumer has meant the change has remained more or less unnoticed.

"The relative percentage of sales and advertising spend in the UK is absolutely minuscule compared to the US or Latin America," said Nadin. "The UK market is too small and not really mature enough to really be affected by the crisis. The amounts available will be enough to satisfy the demand from the British consumer," he added.

While the relatively small, but continually growing, UK demand is not likely to suffer in the short-term, it is feared that the shortage could alienate the higher quality tequila and put it out of reach of the experimental in terms of both price and appeal.

It is at this upper end of the market, home to the exclusive 100 per cent agave sipping tequilas such as El Tesoro and Herradura, that the damage has really been done. Some have been forced to reduce the quality of their blends in order to keep prices within the reach of their usual consumers.

Quentin Churchill, tequila aficionado and owner of Tequila Tequila in Leeds - one of the UK's few bars dedicated to the spirit - warned of a damaging trickle-down effect in the category. "They are either going to put less agave in or hike the prices up," he said.

It is the long-term effects of a possible polarisation between standard and premium 100 per cent agave tequilas that concerns most in the industry.

Some of the smaller producers are content to rely on tequila's appeal as a 'slamming' drink in order to ride out the storm. "We don't really mind what they do with Olmeca, they can slam it, shoot it - each to their own," said Sutherland. "We're not at the stage where the consumer pays the same amount for a tequila as a single blend whisky. If it gets too expensive they won't stay loyal to the category. It's a relatively generic sector and there is a definite ceiling," she argued.

Jose Cuervo has long been regarded as the Pied Piper of tequilas, and if the category is going to break through this ceiling then it is the UDV brand that must lead the way.

Last year, Jose Cuervo launched a humorous "Don't Slam" promotional campaign in an attempt to coax drinkers away from shots and slammers. The idea was to exploit the potential of the category by bringing the UK market up to speed with other countries where tequila is accompanied by a mixer, drunk slowly and savoured. Although this campaign has since stopped, Jose Cuervo is still promoting tequila as a dynamic cocktail ingredient, and focuses its entire advertising campaign on its superior gold premium tequila rather than its white variant.

Nadin admits that the whole process of widening the appeal of tequila has suffered a major set back due to the crisis. "If a category is going to grow, then it has to broaden its appeal through a wide range of drinking occasions," said Nadin. "The conversion process will be a bit slower than ideally wanted - it will probably be delayed by a few years as some competitors will maybe want to focus on other products during this difficult period."

However, in a move that mirrors trends abroad, there is a small but growing demand for top-brass tequilas. Nadin said: "An increasing number of people are travelling to South America, discovering the joys of good quality sipping tequilas and are on the look-out for the authentic product when they return to the UK. Things are changing, six bottles of Jose Cuervo Collezione, retailing at $1000, were sold at London's Che bar last year."

There is a general feeling that it is a make-or-break period for tequila. If the category is going to challenge vodka and gin in the long-term, and rub shoulders with cognac and malt whiskies in the connoisseur bracket on a wider scale, then the likes of Jose Cuervo must continue its persuasion process.

"The public must be educated and encouraged to experiment with quality tequilas. If this can be achieved then the tequila industry as a whole would benefit," said Churchill. "If not, and people are exposed to tequilas that put them off the drink, then the entire category could suffer terribly."

Tequila glossary