In 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 corporations outside of Mexico have made themselves the primary beneficiaries of the agave legacy. Hundreds of families who devoted generations to blue agave have been forced to abandon their traditional crop. Corporations turn to inferior black market agave (from outside the DOT region) during down cycles.The Sauza & El Tesoro brands sold out to Fortune Brands three years ago. Two years ago, the once-trusted brand Herradura was sold to Brown-Forman for US$776 million. José Cuervo operates a “Tequila theme park” in Jalisco, for those who don’t mind a good headache. The vast majority of market share for distilleries like José Cuervo and Sauza come from tequilas made from 49% non-agave sugars (mixed brews containing sugars found in vodka and rum, along with agave sugars). Such large commercial operations wreck the ecology of Jalisco with chemicals and subvert a tradition of sustainable organic agave production that is thousands of years strong.The product life cycle for inferior “mixto” tequilas is no longer in the growth phase. The opportunities for product differentiation are substantial. One direction is fair-trade agave. The current trend is moving toward tequilas made from sustainable crops using practices that promote social equity and fairness for agave producers. Fair Trade Agave certification is a likely next step.Two organizations already working to correct the missteps in Jalisco are Empresa Ejidal Tequila de Amatitan & Cooperativa Tequilera La Magdalena. Empresa Ejidal is the home of Azuñia & Regional Tequilas (as in, a source of regional pride). Agave for these brands is grown by one of the region’s oldest agave growing families, the Sergio Zuñiga family. Crops are grown without chemical fertilizers or pesticides; planting and harvesting is done entirely by hand. These products are finding consumers in the USA through the efforts of Maverick Spirits, exporting to Newport Beach-based Intersect BeverageCooperativa Magdalena grows agave used in El Caudillo & Sangre Azteca (“Aztec Blood”) Tequilas. Agave for these brands comes from dozens of organic agave growing families that together make up the cooperative. These family-based farming cooperatives are not interested in making the types of tequilas provided by the multinational corporations (MNC’s), “mixto” liquor destined to be mixed in drinks or served as shots with lime and salt. Instead, they create fine, traditional tequilas to be sipped by aficionados. In Mexico, such tequilas are served alongside equal-sized glass of Sangrita, a mixture of tomato, orange, and chili pepper juices. Family-based agave producers and distillers are not content to watch their traditions perverted. There is talk in the City of Tequila in favor of new NOM regulations that will prevent MNC’s from continuing to degrade the reputation of Mexico’s national drink along with Jalisco’s ecology. “Stricter rules are necessary to make tequila successful for both companies and farmers,” states University of Guadalajara sociologist Peter Gerritson. Regardless of the outcome of such initiatives, there are new agave investment opportunities in Jalisco as the tequila pendulum swings back toward traditional producers. Health food stores now sell the natural sweetener that is un-distilled, pure agave nectar for the same price as a fine bottle of tequila. Agave nectar provides an alternative to honey for households worldwide, and an alternative for traditional farmers to the glut created by corporate growers. Savvy consumers are increasingly interested in sustainably produced products as an alternative to corporate headaches such as “shots” that are only half tequila. These trends, coupled with 28% average annual growth for artisanal tequilas, suggest investments in organic agave products can once again provide attractive dividends for investors while supporting farming families and the ecology of the region.
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