Could finite supply and high agave prices be about to burst Tequila’s celebrity-driven bubble?

The numbers are staggering, the inflation rate jaw-dropping. No, we’re not talking about the latest energy bill, or the total rung up at the checkout during your weekly trip to the supermarket. We’re talking famous folk on the ‘gram. When I first wrote about the celebrity Tequila phenomenon a year ago, I noted the pulling power of Teremana Tequila’s Dwayne ‘The Rock’ Johnson (at the time, 257m Instagram followers), and 818 Tequila’s Kendall Jenner (a mere 177m). Fast forward twelve months and The Rock now has 333m people tracking his stories and reels; Jenner 253m. It’s as if, in the space of a year, the entire populations of Canada and Morocco have decided to follow them both. Humble beverage alcohol brands can only dream of those kinds of numbers. Most of them can only dream of these kinds of numbers, too: Diageo’s Tequila sales in fiscal 2022 were up 55% on an organic basis, with volumes rising 47% – and the disconnect between those two numbers is, in itself, an indication of the category’s continued premiumisation. If Don Julio’s performance was impressive – volumes up 24%, revenues rising 36%, on top of years of uninterrupted growth – that of Casamigos was nothing short of astonishing: volumes increasing by 83% and revenues surging up 90%. Those who scoffed at the cool US$1bn Diageo paid to George Clooney and his pals for Casamigos back in 2017 might like to rethink their scepticism. Five years ago, Tequila accounted for 2% of Diageo’s global revenues; two years ago, it was 5%; now, it’s 10%. Has a single category ever enjoyed such a swift and dramatic rise in significance for a business of Diageo’s scale? I very much doubt it. And as for those who questioned the wisdom of the company casting off Bushmills in favour of Don Julio back in 2014… US continues to dominate global Tequila sales It’s even more amazing when you consider that Tequila is, in global terms, pretty much a one-trick pony. The home nation of Mexico is, of course, a sizeable market, especially in terms of volume, but most of the growth, and the continuing value potential, is located squarely in the US. Brand owners would dearly like to change that, of course. They’d love the bar-goers of London, Paris, Sydney and Shanghai to discover the joys of 100% agave and cristalino, or to explore the nuances that distinguish agave grown in the valleys to those cultivated at higher altitudes. But, while they wait, the seemingly unstoppable US will do them very nicely. As Tequila has premiumised and moved beyond the ubiquity of the Margarita to take in an ever more diverse universe of serves and consumption occasions – cocktails, flavours, RTDs – the momentum becomes, for a time at least, self-regenerating. Eyeing the opportunities at the higher price points, brand owners have expanded their super-premium-plus product offer and continue to chase the market with a never-ending run of cristalinos and US$100-plus añejos and extra añejos. No matter that many of these taste more like Bourbon than Tequila – the overegged wood masking the agave – they’re slaking the thirst of a seriously demanding market. What goes up, must come down (or at least stop rising) Anyone with a few grey hairs will be wondering just one thing at this point: how long will it all last? Whether we’re talking flavoured vodka, gin or hard seltzer, the one guarantee about astronomical growth is that at some point, it comes to an end. Right now, I feel like a killjoy for even raising the subject. But the industry is currently facing persistently high agave prices – the product of unexpectedly dramatic growth lasting through the pandemic with scarcely a pause – on top of the challenges afflicting everyone in industry: energy price hikes, supply chain constraints, spiralling inflation. Could Tequila overheat as a result? The industry is reliant on a geographically restricted supply of a finite, farmed raw material – agave – that takes several years to reach full maturity. Add in an increasing focus on higher-priced, aged Tequilas and that supply squeeze is tightened further – once you sell more aged product, you need to increase your agave intake still further to keep up with production demands. It may be hard to see this as today’s – or even tomorrow’s – problem, but as a category Tequila is not unfamiliar with periods of volatility. And they will come again – it’s just a question of when. As for those famous names, I suggested a year ago that celebrity Tequila was “probably” becoming a bubble, and I stand by that. Not everyone can do a Clooney, or even a Rock, or a Jenner. Every famous (and not so famous) name that attaches itself to the category dilutes the impact of those who follow. Soon, for a celebrity Tequila to cut through, the person concerned will either need to be very famous (Clooney), or very savvy (to borrow an example from gin, Ryan Reynolds/Aviation). If you can’t do one, or preferably both, you’re probably better off sticking to what every other celebrity does on Instagram: posting reels of your cat doing something vaguely cute or amusing. “We’re a million miles away from college boys doing shots” – Mijenta Tequila founder & ex-Bacardi CEO Mike Dolan