In early May, a class action lawsuit was filed in the US District Court of the Eastern District of New York that accused Diageo North America of falsely marketing its tequila brands as 100% agave. In the filing, plaintiffs Avi Pusateri, Sushi Tokyo Inc and Chaim Mishulovin alleged that the spirits group had sold “adulterated tequila to consumers” and that an investigation of Casamigos and Don Julio tequilas, which claim to be 100% agave, showed them to “consist of significant concentrations of cane or other types of alcohol rather than pure tequila”.

These are monster claims and if found to be true would have huge ramifications for the tequila industry far beyond the damages that the case is seeking.

But a couple of things to note. First, Diageo has strongly refuted these claims. A statement from the North American subsidiary of the group said: “These claims are meritless, and we plan to vigorously defend ourselves in court.”

Also, the plaintiffs behind the lawsuit – a New York-based cocktail consultant, a New Jersey-based consumer and a Brooklyn sushi restaurant – don’t appear to be tequila industry insiders privy to confidential evidence and, while there’s no indication that Diageo has committed any wrongdoings, this isn’t the first time allegations of adulterated tequila have been made within the industry.

In January, agave farmers took to the streets of Tequila in Jalisco to call for fair agave prices and to protest alleged corruption within the industry.

At the protest, Remberto Galván Cabrera, the official spokesperson of the Mexican Agave Council, told the publication Mezcalistas: “This is a battle for everyone because the consumer is being poisoned drop by drop by tequila that’s labelled 100 per cent agave but it’s not. We want tequila made with agave…The tequila industry has been deceiving us.”

Galván went on to claim that he’s witnessed trucks delivering cane alcohol to distilleries and has sent samples of tequila for laboratory testing to discern whether adulteration has taken place. “In terms of rumours, people in Jalisco think this kind of thing is common practice – that said, I don’t think that a big brand would intentionally water down its tequila to save a couple of bucks,” says Freddy Andreasson, founder of El Gallo Altanero in Guadalajara, Mexico.

“It could be that someone down the supply chain could not be totally honest. There might be a supplier who signed a five-year contract to sell another brand’s liquid, or an agave grower who signed a contract to sell at a certain price per kilo. If the market price of agave goes up, that person might want to make a little more money. Mexico has a lot of corruption, but I say that anywhere there’s a lot of money, there's corruption, it doesn’t matter what the country is.

“What could potentially come out of this lawsuit is that there’s an open secret in the industry that alleges that brands bulk buy liquid from other producers and that liquid, out of the oversight of a brand’s own distillery, could be something other than advertised.

“Agave prices have fallen now, but during the three years where they were really high, tequila was very expensive to produce. It would be cheaper to buy diffuser-made tequila and add it to traditionally made tequila.”

Opening a discourse

Before the lawsuit has the opportunity to go through the courts, any speculation about the ramifications of a verdict either way is purely hypothetical, but the claim has opened up a discourse about to what extent a consumer knows what they’re purchasing.

“If it is corroborated that a number of different samples from these brands contain alcohol from secondary sugars, it could be such a blow to the reputation of the company and the category,” says Jorge Balbontin, who helped launch Tequila Curado alongside Tomas Estes and Carlos Camarena and recently launched his own tequila brand, Brix.

“It would open up the conversation about how many other things are being allowed to happen behind the doors in tequila production that we don’t know about. All the way back to the raw material. It’s important to remember that none of the big brands grow all of their own agave. Not Patrón, not Diageo, not any of them. They’re sourcing from a number of different growers and it’s almost impossible to know everything that’s going on in those fields. It’s possible to alter sugar contents and add things to the agave, it’s impossible to know exactly how those agaves are being treated.”

The filed class action claim makes references to mixto tequila but doesn’t make clear if the accusations made against Diageo accuse the brands of bottling mixto as 100% agave tequila. Mixto tequilas are permitted to contain a minimum of 51% sugars from agave, and a maximum of 49% of sugars from other sources, provided they are added prior to fermentation.

If adulteration occurs post distillation, the process is known as cold mixing, which is illegal according to the legal standards and regulations outlined by the Mexican government, the Norma Oficial Mexicana (NOM). Galván’s claims that he has witnessed trucks delivering cane alcohol to distilleries could indicate he is alleging that tequila distilleries may be performing cold mixing.

“According to Mexican law, tequilas that are marked as 100% agave must be produced exclusively from blue weber agave grown in designated places in Mexico,” says Chris Jones, managing director of Paragon Brands. “Transparency is key, and it’s important nothing damages the whole category. Consumers care about what is in their glass. We’re seeing a real appetite for novel and exciting drinks brands – and, importantly, brands that meet quality standards. Mixto is a staple product within the category and there are some brands that do it particularly well. It exists due to demand in the market for tequila at an approachable, affordable price point and it does have appeal to a wide section of consumers.”

And mixto itself is commonplace. According to CRT statistics, in 2024 about a third of tequila produced was classified as mixto with the remaining two-thirds meeting the 100% agave classification. “There shouldn’t be any need to falsely sell mixto as 100% agave tequila,” says Andreasson. “We have the mixto category, if you want to make cheaper tequila, make mixto, that’s totally fine.

“Tequila is one of the most controlled spirits in the world. The NOM is very specific in the way it can be produced. In reality, if you’re a producer, you should be able to trace every bottle back to where the agave was grown, and what year it was planted – there are very few spirits with that much traceability. That level of regulation and control would make these allegations even more damaging if true.”

Style categorisation

Part of the fuel for the rumour mill in Jalisco is the way that the category operates. Tequila manages to straddle high levels of regulation, the agreed NOM is highly prescriptive about what can be categorised as certain styles of tequila, while also maintaining a distinct lack of transparency around huge segments of production.

“The main five or so companies account for more than 80% of total production but, outside of that, the celebrity-endorsed brands, or brands created by people who want to have a tequila, the majority of those are contract distilled,” explains Balbontin.

It’s in this practice of contract distilling that Balbontin thinks there could be instances of brands not knowing exactly what is inside their liquid.

“Speaking from experience, when I was talking to my wish list of distilleries to work with for my brand, I found that almost every distillery I approached would ask me to send it the information of what I wanted my tequila to taste like. It would send me five samples, we’d narrow down to three and then pick my tequila to bottle,” he explains.

“That doesn’t work for me, I need to be part of the process, make my own tequila with the master distiller and know what is in my tequila, but for people who just want to launch a brand and don’t want to get involved in production, how can they know that their tequila isn’t full of additives or illegally claiming to be 100% agave when it’s not?”

Thanks to the booming category punctuated by several big money purchases, contract distillers in Jalisco aren’t short of clients looking to launch brands.

“I’ve been in Guadalajara for almost a decade and I’ve met a ridiculous amount of people in the bar who are in town to start a tequila brand,” says Andreasson.

“I’ve seen two waves. The first was after the Casamigos sale, lots of people came down looking to cash in, mainly celebrities. And it was everyone – what does Mark Wahlberg know about tequila? He’s from Boston. The second was after Covid when ultra-premium tequilas in fancy bottles became big money.

“Some of the brands that are contract distilled are seen as a good opportunity for a distillery to make some money. Someone will come down from the States with $300,000 if the brand is successful or not, the factory doesn’t care, they’re getting paid. There are examples of partnerships with distilleries that aren’t like that – the brand and distillery work together and grow together – but I’d say a lot of tequila makers made their money contract distilling, it’s a part of the industry that’s seen as easy money.”

But it’s not the contract distillers, the agave farmers or celebrity-endorsed brand owners that are on trial here. Technically, no one is on trial here at the time of writing, but the gravity of the allegations made against Diageo North America shouldn’t be underestimated. They accuse a subsidiary of one of the world’s largest spirits companies of being complicit in the sale of adulterated alcohol. If found to be true, the shockwaves would be felt throughout the tequila ecosystem – brand owners, distilleries, retailers and an already under-fire CRT alike. Diageo has promised to vigorously defend itself in court, and it will be doing so before the entire industry.