BY 2016, tequila and mezcal sales are predicted to increase by 8% to 27 million cases (Euromonitor). As customers continue to move to the more premium 100% agave end of the market, that’s a lot of agave plants. Right now, there is a question mark over what this will do to raw material prices in the region.

Tequila expert Tomas Estes sent word from Mexico that agave prices are rising. He says agave prices were “under 1 peso a kg” but that prices are now reaching “4-5 pesos a kg”.

“This is because the supply of available ripe agave is getting more scarce,” he adds.

Estes elaborates: “This is expected to continue creating higher prices which will have the effect of creating more cost to the producers. Some will pass this on to the consumer if they can and some that are already selling within tight margins and highly competitive market prices will likely fail unless they have deep pockets.”

Greg Cohen, director of corporate communications at Patrón Spirits, also notes an increase in the price of tequila’s raw ingredient – though he can’t foresee problems for Patrón.

He adds: “We’ve certainly seen the effects of that on our bottom line, but fortunately we have long-term contracts with top growers in the region, so we’re in a good position to manage these costs.”

But over in the Beam camp, those in the know say agave prices are relatively low. Salvador Alvarez, senior vice president, managing director for Casa Herradura tequilas, says: “We are not aware of any public reports in Mexico about agave prices rising (only that agave growers want higher prices, which is understandable).

“The price of agave is driven by supply and demand and, when compared to historical market trends, agave prices have been low for the past few years. Over the the past 36 months, there were plenty of reports about pricing being very low. Also, according to Nielsen in the US and ISCAM data in Mexico, recent trends within the tequila cateogry show that more brands are lowering price than increasing price.”

Like most spirits categories, though, producers want to drive the premium end through bartenders – that means 100% agave tequila, which means 100% raw materials, rather than the 51% needed for mixto tequilas.

Estes says: “The newer market for tequila continues to be in the premium sector.” He says it is now the job of the bartender to convey tequila’s positive values to the consumer.

He adds: “It does appear that this message is already under way since sales of tequila 100% [agave] are growing in a progressive direction.”

Indeed, Euromonitor International alcoholic drinks analyst Spiros Malandrakis says: “The story of premium varietals outperforming standard brands is adequately personified by Patron’s rise among the pantheon of luxury brands.

“Patron, particularly successful in the US but expanding its reach rapidly, makes for an interesting case study. The brand’s initially skyrocketing sales proved to be surprisingly resilient and remain so, with Patron accounting for 15% of total tequila volume sales in the US in 2011.” That’s no small achievement considering the US is the largest tequila market, accounting for 12 million nine-litre cases of volume in 2011 (including Mezcal).

Cohen adds: “Within the 100% agave segment, silver tequilas are becoming very popular because of their versatility and mixability.

“For instance, pretty much any cocktail you can make with a white spirit such as vodka, rum or gin, you can also make with Patrón Silver tequila.”

In the Pernod Ricard camp, mixability is the name of the game. Next month will see the final of its Tahona Society cocktail competition.

UK brand ambassador Matthias Lataille says: “Over the past three years Olmeca Altos and the Tahona Society have trained more than 1,000 bartenders from all over the world in cross-category quality tequila. The Tahona Society Cocktail Competition by Olmeca started with nine bartender finalists from six countries in 2010, and has grown to 19 bartenders from 11 countries this year. This year, the Tahona Society will change from a Margarita contest to a cocktail competition, which will allow bartenders to fully express their creativity.”

Innovation

Last month, Olmeca announced that it was rolling out its Fusión Dark Chocolate tequila liqueur to Spain. This follows the product’s launch in South Africa, Greece and Austria.

Olivier Fages, international vice-president for Olmeca, says recruiting new tequila fans is a big part of the appeal of these products. He says: “While bartenders across the globe are really embracing tequila with innovative and exciting cocktails, there is still huge scope to grow the other side of the category, by recruiting young, adventurous consumers.”

The Fusion range also includes Olmeca Fusión Hibiscus (20% abv), which is available in Greece and Austria.

Variations on a theme

Patrón is attracting new drinkers with its tequila-based coffee liqueur, Patrón XO Café. The drink uses Patrón Silver tequila as the base spirit and Cohen says international growth of the product is up 38% for the year to date.

Cohen adds: “Not only is it unique and highly versatile in cocktails and cooking recipes, it has also proven to be an effective entry point into tequila for some consumers who are curious about the category but may still be a bit wary of tequila.”

Earlier this year, Tomas Estes launched Ocho Curado in the UK – a blanco tequila with a maceration of cooked agave.

Following the success of the launch, Ocho is set for further innovation.

Estes is planning a ‘late harvest edition’, which is made “exclusively from agaves harvested just before the rainy season so the raw agaves have concentrated sugars, acids and minerals”.

Estes is starting to sound like he’s describing a vintage. Could this be the next stage for tequila? After all, it seems to be working for the scotch whisky industry. As for parting shots, there’s not one in sight.