Agave & Tequila: Case Study in the Evolution of an Agribusiness Opportunity

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In 1974 Mexico’s government establishedIn the 1990s there was too much agave, thanks to
the Appellation of Origin Tequila (DOT) to establishover-planting by fast-growing commercial tequila
guidelines for agave production. The agavedistillers engaged in vertical integration. Traditional
grower’s cycle from planting throughgrowers began receiving unsustainably low prices for
harvest takes about a decade. This is one reasonagave, so they switched to other crops. At the
tequila is so expensive lately— forecastingsame time that many traditional, organic agave
demand with ten years lead time is difficult.growers abandoned the tequila ship, the popularity of
According to regulations of the Norma OfficialMexico’s national drink began to increase
Mexicana (NOM), Tequila can only be produced fromglobally. Since 2002, premium tequila sales have
agave grown in the volcanic soils in and around theincreased an average 28% annually. This has led to
Jalisco region, much like Champagne can only befrequent shortages of agave. Many tequila distilleries
produced in that region of France. But unlike grapesclosed due to a lack of agave in the last down cycle.
from Champagne, agave production has seen wideThere are over 200 varieties of agave but only the
variations in up and down cycles. Such swings are notAgave Tequilana Weber blue variety is permitted by
uncommon in the growth stage of a product lifethe NOM.