In this post will talk about the history of tequila production, so you can understand a little bit more about the evolution of tequila. We will be explain the history of the production based on the graph below; the red line represents the total amount of tequila produced, the dark green represents the tequila production, and the yellow line the tequila 100%.
Tequila was not very popular between the mexican society but it all started to change towards the end of the1990s. The demand for Blue Weber agave was increasing and the farmers in the Tequila Region saw an opportunity so they started planting more agaves, the mexican government was also aware of the growth of demand for agave so they instructed banks to open credits to farmers to plant even more agave in order to satisfy the needs of the tequila industry.
Among the agave growers who got those credits were my cousins, who had planted agave for generations.
As a result, after 9 to 12 years that agave needs to grow, the Blue Weber Agave production was more than the quantity needed by the tequila industry, causing the price of agave to drop dramatically. Some farmers could not sell all agave and others were not obtaining fair prices for it. Banks were pushing to get their money back but there was not enough market for all agave, prices lowered even more. There was no way the agave growers could pay the banks back, so they started letting the agave spoil or burned their plantations.
I remember my uncle Juan trying to sell his agave at the distilleries. He was trying to get at least $0.80 MXN per agave Kilo. The truck’s line trying to deliver agave was long, finally when we got our turn, the buyer told my uncle:
– I will give Mx $0.20 per Kilo and will pay you in 6 months, if you do not agree, get out of the line.
The offered price was less than the cost for jimar the agave and to carry it into trucks to the distillery. But he had not option. As this situation lasted for several years without the possibility to pay back to banks, my uncle finally suffered a stroke that killed him.
In 1995 with a Peso/Dollar big gap parity, middle Mexican class could not afford to drink any more imported Cognac or Whiskey, the only affordable drink on shelves was Tequila. At the time, very few people in Mexico had heard about Tequila 100%, but due to the high prices of imported drinks Mexican middle and high classes started to try Tequila, and immediately realized of the great flavor and quality of this great Spirit.
And so the popularity of Tequila increased significantly, not only in Mexico but also on an international level. But we have to remember that just a couple years before some farmers had burned their plantations or stopped planting agave, at the time it was not a problem because there were enough agaves for the production of tequila, but now with the “Tequila Boom” there were not enough agaves to satisfy the demand and tequila quality started to decrease. The aforementioned gave place to the “Agave Crisis”. The agave prices started to go up and up, to the point that agave growers with available rape agave became millionaires.
For example, in 1993 my cousins used to get around $20,000.00 MXN per agave truck, for year 2000 they were getting $400,000.00 MXN per agave truck. They were able to pay off the banks and recovered their land. Unfortunately my uncle was not present to see this happening.
In 1999 I was living close to Miami, in a town named Coral Springs, trying to push my Tequila brand “Tequila 1921”, but as agave kept going up and our profit was close to nothing, we decided to stop selling it. Suddenly I was without income and economic pressure became unbearable. One day I received a call from a broker asking me for bulk Tequila (51% – 49%). He wanted 25,000 gallons per month for a big rectifier in the USA. I started to call several distilleries but everybody was using the few available agave for their 100% Tequila brands, nobody wanted to sell Tequila at a low price. Finally a distillery quoted me $12.00mUSD/Gallon of tequila and agreed in a 3% commission. I called the broker and informed him the price. Three days later he called me to inform the rectifier had accepted the price. I called the Tequila distillery and they say:
– Oh, we have a problem. Tequila gallon is now worth $18.00 USD per gallon
– What? -I said, -this cannot be, you just said USD $12.00/Gallon a couple days ago!
– Sorry, nothing we can do about it – They said.
When I called the broker to inform the new price, he just yelled at me saying Mexicans were a whole bunch of thieves and hung up. A couple days later the broker called me to inform the rectifier had accepted the new price, again I called the tequila distillery and they say:
– Oh, again a problem, now it is $22.00 USD per gallon.
– What is going on? – I asked.
– It is just that agave is getting up day by day; sorry about this, but there’s nothing we can do about it.
Again I phoned the broker to inform him and again he yelled and insulted me like crazy. Next day the broker phoned me and said:
–I’m about to go in a meeting to inform the last price. Please call the distillery and ask them if they can keep the price for a week.
I called the distillery and they said yes.
An hour later the broker calls again and said:
-They want to know what distillery it is, they need to check it.
Very unwillingly I had to give him the name.
The next day I called the broker to ask what had happened.
-They accepted the price and already placed their order.
– What? The order had to be placed through me!
-Well I do not know what deal you had with the distillery, but the order was already placed.
– You do not know how things are in Mexico. – I thought
Immediately I called the distillery and asked for the owner, Mr. Gomez, the person I had been talking to.
– Hey Mr. Gomez, I want to inform you that my customer will place an order of 25,000 gallons per month today.
– Yes – he said – we just had an order from Heaven Hill.
– Mr. Gomez, Heaven Hill is my customer, the one I have been quoting for with you for the last month. Please do not forget my 3% commission.
– Oh, I am so sorry, but this order was a direct call to us. I cannot consider any commission to you.
– But Mr. Gomez, we have been talking and I had told you the quote was for a customer in the USA. – I said.
– Yes, but as I explained to you, this order came to us directly. Let me see what can I do for you, please call my accountant tomorrow.
When I called the next day the accountant told me that as the order came directly there was not any overprice in the selling price to consider any commission and hung up. I got so frustrated that started to hit my head against the wall. My 4 year old son shocked asked my wife:
– Why is dad hitting his head so hard?
– That’s the way he thinks. – She answered.
Next day I called the broker, after explaining him what was going on, I asked if a change of distillery was possible. As I was sharing this 3% commission with him, he accepted to inform Heaven Hill of this. Finally I was able to get another distillery interested and 3 days later we closed the deal. A week later Mr. Gomez called me to ask for Heaven Hill because they have not taken any call from him.
In the graph below we can observe that towards the end of the 90s the total production of tequila started to increase, especially the tequila production (dark green line). Then, after a peak at the end of the 90s and beginning of 2000, the production dramatically decreases, it’s more notable in the production of Tequila 100%, these marks the “Agave Crisis”. During this time some Tequila brands started selling mixed tequilas (51% agave sugar, 49% Cane sugar).
After 2004, we can see that the production starts increasing again very slowly, while the industry recovered from the crisis. In 2007 and 2008, the Tequila 100% production (yellow line) suprasses the tequila production (dark green line) and for a couple years the production of this two stays steady until 2012, when they invert and now the tequila (dark green) is more than the tequila 100% production (yellow line).
Remember the production of tequila represents Tequila that’s mixed with other sugars or has color added, while the tequila 100% ingredients are exclusively from the Blue Weber Agave.