Is agave the next great spirit?

Agave is having a moment. While spirits distilled from the plant, like tequila and mezcal, have always been crowd favorites, they’re currently experiencing a worldwide boom.

The growth of agave spirits didn’t come out of nowhere and brands have been taking notice for years. Have you spotted more mezcal being offered in stores, bars, and restaurants lately? This isn’t a coincidence. Between 2017 and 2018, industry giants like Pernod Ricard, Bacardi, and Sazerac all invested in mezcal, signaling the smoky spirit’s expected expansion. Companies may have been eyeing mezcal, but tequila sales remained popular and made $3 billion in revenue in 2018.

The recent agave explosion presents a great opportunity for large and independent companies around the world. Although Indigious communities in Mexico have grown and distilled the plant for centuries, agave-based spirits are currently in global demand. This year, Americans will spend more money on Mexican-grown agave spirits than they do on American-made Whiskey for the first time ever. By 2023, tequila and mezcal are expected to dethrone vodka as the country’s favorite spirit based on sales (and carry an impressive $13.3 billion value). In Canada alone, agave’s value is expected to grow 109% by 2026.

However, it’s important to remember one major factor–by definition, tequila and mezcal must be grown and distilled in Mexico. Furthermore, to be considered mezcal it must be produced in one of nine Mexican states (Durango, Guanajuato, Michoacán, Guerrero, Oaxaca, San Luis Potosí, Tamaulipas, Zacatecas, or Puebla). Although mezcal can be distilled from multiple agave plant species, tequila has to be specifically distilled from Weber blue agave.

To get around this, companies outside of Mexico are creating new spirits by growing and distilling agave in their home countries. This works well for countries with warmer climates (like Australia, India, and South Africa, who’ve all seen a rise in agave-based spirit production).

In the US, states such as Texas and California have established themselves as the country’s agave-growing leaders. After a St. George Spirits distiller created a non-commercial spirit (from Mexican-grown agave) in California’s Alameda distillery, there has been an increase in brands distilling agave grown in The Golden State. California even introduced a bill to create their own label standards for agave spirits à la Mexico.

Growing and distilling agave not only opens the doors for brands to expand their offerings, it also presents an opportunity to have more sustainable, locally grown spirits. This is a win for both the environment and conscious consumers who are open to experiencing the unique taste of agave spirits from their area. The sudden rise in popularity, as well as the many years it takes an agave plant to grow, also comes with concerns of an agave shortage. Naturally, this could result in less tequila and mezcal being exported and imported. Producing local agave could be a profitable substitute if this happens. Additionally, growing agave in different countries could help reduce over-growing and over-harvesting in Mexico.

From investing in existing companies to working with local farmers and distillers, there are multiple opportunities for brands looking to get into the agave spirit game. And with growth that isn’t expected to slow down any time soon, now might be the perfect time to hop on the bandwagon. Whether it’s mezcal, tequila, or a newly created beverage, there’s no doubt agave is on pace to become the next great spirit.

Danilo Diazgranados is an independent investor in the global food and wine, financial services, real estate, and the hospitality sectors.

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Danilo Diazgranados: On wine and food

Danilo Diazgranados: On wine and food

Investor in and lover of fine wine and restaurants.