Agave & Tequila

A Case Study in the Evolution of Opportunity

Agri BusinessIn 1974 Mexico’s government established the Appellation of Origin Tequila (DOT) to establish guidelines for agave production. The agave grower’s cycle from planting through harvest takes about a decade. This is one reason tequila is so expensive lately— forecasting demand with ten years lead time is difficult.

According to regulations of the Norma Official Mexicana (NOM), Tequila can only be produced from agave grown in the volcanic soils in and around the Jalisco region, much like Champagne can only be produced in that region of France. But unlike grapes from Champagne, agave production has seen wide variations in up and down cycles. Such swings are not uncommon in the growth stage of a product life cycle.

In the 1990s there was too much agave, thanks to over-planting by fast-growing commercial tequila distillers engaged in vertical integration. Traditional growers began receiving unsustainably low prices for agave, so they switched to other crops. At the same time that many traditional, organic agave growers abandoned the tequila ship, the popularity of Mexico’s national drink began to increase globally. Since 2002, premium tequila sales have increased an average 28% annually. This has led to frequent shortages of agave. Many tequila distilleries closed due to a lack of agave in the last down cycle. There are over 200 varieties of agave but only the Agave Tequilana Weber blue variety is permitted by the NOM. Small organic growers no longer account for a majority of agave production.

Large corporate growers’ attempts to forecast and meet demand have created another disaster. According to Ana Valenzuela Zapata, writing in the Journal of Rural Studies, pesticides and fertilizers are wreaking havoc on Jalisco’s ecology. Today, fungi attack the root of the agave plant with increasing frequency. Soil erosion is widespread. The species is strained by pest infestations. Local water quality is dismal. Distillers routinely harvest younger plants (which are required in much larger numbers than mature agave), laying the groundwork for the next down cycle.

The time has come to return to sustainable agave farming and production cycles. Tequila is amongst the national symbols most representative of Mexico throughout the world. Agave was the source of drinks enjoyed by indigenous tribal leaders and high priests long before the Spanish colonized Mexico. According to Aztec legend, fertility goddess Mayahuel is the personification of the agave plant. Archeological evidence of agave culture in this region dates back at least 1700 years, if not even earlier.

In 2009, 100% blue agave commands prices of US$50 per bottle or more. It is a tragedy that several large.....




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