How the Tequila Boom Could Go Bust

Volatile prices, high expenses and the agave plant’s seven-year growth cycle are driving farmers out of business.

The world just can’t seem to get enough tequila.

It takes about seven years to grow a blue agave plant, the spirit’s prized ingredient. Once mature, tequila makers have to extract the “pina,” or heart, so it can be heated, crushed, fermented, distilled and finally bottled and sold by your local mixologist as part of a trendy cocktail. 

But over the last two years, volatile agave prices have soared, thanks in part to high tequila demand. According to an industry survey by Taste Tequila, the plant can cost as much as 25 pesos ($1.31) per kilogram, up from 2 pesos (10 cents) in 2012.

“Agave prices have priced out brands where there’s no estate or distiller,”

said Nicolas Palazzi, the owner of craft spirit importer PM Spirits, which has seen 220 percent growth in revenue in the past year, with tequila as a key player.

MORE