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Mexico’s tequila industry is facing challenges as it grapples with a surplus of inventory, slowing demand, and the threat of tariffs on exports to the US. By the end of 2023, the industry had 525 million litres of tequila in inventory, nearly equivalent to its annual production. This build-up of inventory is attributed to falling demand and new distillery capacity in Mexico. Analysts predict a turbulent future for the tequila industry.
Over the past decade, the popularity of tequila in the US surged, driven in part by celebrity-backed brands. However, demand has declined in recent months due to the end of the pandemic spirits boom and higher prices. Tequila consumption in the US has dropped, posing challenges for the industry.
In addition to these challenges, the industry faces the threat of a 25 per cent tariff on exports to the US by Donald Trump, which could have devastating effects on Mexico’s economy. Despite concerns about potential tariffs, there is optimism that they may not materialize, citing previous threats by Trump that did not come to fruition.
Tequila producers have been responding to weaker demand by cutting prices and benefiting from lower raw material costs. The oversupply of tequila has led to a significant drop in the price of agave, the plant used to make tequila. Despite these challenges, there is hope that the industry will adapt and overcome the current obstacles it faces.