By Chris Morris
February 1, 2018

Celebrating Cinco de Mayo could cost you more money this year.

A worsening agave shortage is causing price spikes in the tequila industry and could lead to shortages even among major manufacturers. Agave is the key ingredient in making the alcoholic beverage.

Reuters reports the price of the plants has risen sixfold in the past two years. And since Agave takes seven to eight years to reach full maturity, some tequila makers have been using young plants to fulfill demand from tequila companies. Those, in turn, produce less tequila and lead to a cascading problem of fewer fully mature plants the following season.

Farmers are planting more agave plants, but still can’t keep up with demand—and the added threat of theft (some 15,000 plants were stolen last year, a three-fold increase over 2016) is making the problem more severe.

The shortages are expected to continue through at least 2021, which could lead to some tequila companies going out of business as they’re forced to raise prices (and can’t compete with other spirits).

Exports of pure tequila from Mexico to the United States are up 198% in the past decade, with a fast-growing interest in craft and high-end offerings. Patron, last year, added the first year-round offering to its lineup in 25 years. And both Patron and Casa Noble rolled out ultra high-end tequilas last year, with price tags of $7,500 and $1,500 per bottle, respectively.

Spirits companies are consolidating. In 2017, Diageo paid $1 billion for tequila brand Casamigos, which was created in 2013 by Academy Award-winning actor George Clooney and two other business partners. And Bacardi bought Patron earlier this year for $5.1 billion.

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