As the charge of agave plummets, are we about to see a boom in greater high quality Tequila at a reduced selling price point?
The selling price of agave, regardless of spiking fewer than two many years ago, has begun to dive. Costs in Mexico hit a record MXP32/kg only 18 months in the past, but by February 2024 they experienced plunged to MXP5/kg.
Fluctuations in the cost of agave are a prolonged-time period sample, according to IWSR Beverages Market Analysis, with the cycle from peak to peak, or trough to trough, developing roughly each and every 10-15 decades.
The previous pricing trough happened in 2007-10, when selling prices dropped as very low as MXP2/kg.
Agave charges are now on the downward slop, IWSR analysis has pointed out, but what will this indicate for the Tequila boom?
Analysts predict that the fall in value of raw products will supply producers with the possibility to boost product good quality at reduce rate factors.
Tequila and Mezcal brands will also be able to divert more supply to intercontinental marketplaces, what with the elevated variety of agave growers moving into the market place above the past several several years. A huge numbers of new plants that have long gone into the floor in the previous couple years (up by extra than 10% concerning 2021 and 2022 alone). In accordance to field reviews, the range of registered agave growers has far more than quadrupled since 2018 as very well.
Jose Luis Hermoso, IWSR Study Director for Central and South America, stated he has witnessed a “worry sale between beginner agave growers who have a short while ago joined the industry in a bid to dollars in on the agave spirits increase”.
A huge inventory of agave crops, as well as slowing need for premium Tequila in the US immediately after years of significant advancement have prompted the flash sale, but this is not the finish of prices dropping.
“With these kinds of huge figures of new crops likely into the ground in 2021 and 2022, it is solely feasible that pricing will not hit the base until 2026,” Hermoso stated.
Producers are consequently faced with a alternative: with lower charges, they can fund savings to enhance market place share, having said that, manufacturers will be cautious of sacrificing their just lately-acquired fairness by reducing charges.
Adam Rogers, Investigation Director for North The united states, IWSR, spelled out: “Declining agave rates give leading brand name proprietors the chance to make improvements to their margins and/or improve promotional activity in purchase to construct category share.” However, he ongoing, “these experienced, marketing and advertising-led organisations will be cautious of detrimental their brand fairness by prevalent discounting.”
Rogers extra: “We do not foresee any race to the base in pricing terms, with top quality-and-over goods remaining dominant as the current market leaders will be identified to maintain margin.”