Tequila and mezcal sales remain red hot in the U.S. This combined category grew 17.2% in 2022, according to the Distilled Spirits Council of the United States (DISCUS) in their annual economic briefing in February. That gain represented $886 million in additional revenue, totaling $6 billion. By comparison, the much-vaulted American whiskey category was up 10.5% last year, for a gain of $483 million and a total category revenue of $5.1 million.

By any measure, tequila has become a primary catalyst for the spirits industry. Premiumization helps greatly. Rising consumer interest in this category is driven largely by a growing taste for top-shelf bottles.

“More than 60% of the spirits sector’s total revenue was from sales of high-end and super-premium spirits, mainly led by tequila and American whiskey,” says Christine LoCascio, DISCUS Chief of Public Policy & Strategy, in a press release. “While many consumers are feeling the pinch from inflation and reduced disposable income, they are still willing to purchase that special bottle of spirits, choosing to sip a little luxury and drink better, not more.”

It’s a scenario playing out at bars, restaurants and beverage alcohol retailers nationwide. Ask nearly any employee at one these businesses about who is buying premium tequilas — what is the category’s demo — and the answer is: everybody. Like High Noon, tequila has attracted interest from all walks of consumer life. Everybody has made room in their budget for a nice bottle of tequila.

While superb for sales, this category growth does come with a caveat. What does this all mean for the agave plant and its surrounding environment in Mexico? Is the tequila boom sustainable, long term, in an eco-considerate manner?

After all, consider this: The grains that comprise whiskey mash bills, like corn and barley, will grow to maturation in a matter of months. Even the most sluggish of these, rye and wheat, are ready for harvest somewhere between four to eight months. This a time commitment easily manageable from a sustainability standpoint.

However, Blue Weber agave, the base ingredient in tequila, has a maturation period of five to nine years. And that can be considered a short timeframe in the world of agaves. Other agave plants may need more than a decade of growth before fully ripening. That is a stark difference from the months required for the critical grains within whiskey or vodka.

Such long maturation periods make sustainable tequila production a tricky exercise. Ever since the category began its meteoric rise in recent time, an inconvenient question lingers in the background: At what point does spiking consumer interest and sales bring harm to the plant?

Agave Shortages: Natural?

Possible negative consequences are visible on retail shelves today. Stocking certain tequila brands has become more difficult. Of course, these out-of-stocks owe much of their existence to Covid-19’s deleterious effect on distribution and production — including the terrible glass shortage. But concern persists in some parts of the industry that over-farming agave to match consumer demand, coupled with the plant’s extensive maturation periods, has damaged the category.

Few people deny that there is an agave shortage currently in Mexico. But is this the byproduct of all that outlined above — or something more natural, and less alarming?

We recently discussed this issue on an episode of On & Off, our trade podcast covering the on- and off-premise alcohol industry. (Make sure to subscribe!) Our guest for that episode, discussing tequila trends, was Mike Moreno, owner of Moreno’s Liquors in Chicago, a Top 100 Retailer, and the largest vendor of agave spirits in America. Moreno’s is at the epicenter of tequila in America. So how worried was its proprietor about the agave shortage?

“It’s a trend,” Moreno says. “There is data out there, plenty of statistics, that will show you the graph — kind of like the stock market — that show that it’s a specific amount of time where there will be an agave shortage, and then an agave surplus. Right now, we are going through that shortage, but all of these distilleries have been putting tons of money into growing more agaves. You go out there, and there are miles and miles of fields of agave.”

“So it’s something that is temporary,” he adds. “It’s not going to be lasting forever. I think if anything, I’m more concerned about glass shortages and stuff like that than I am of the agave shortage.”

Brands Back Sustainability

To Moreno’s point, top tequila brands have invested significantly in a sustainable future for the category.

“We are the number-one tequila company in the world, and the Jose Cuervo brand has been in production for 11 generations,” says Lander Otegui, SVP of Marketing at Proximo Spirits. “This puts us in a unique position to perfect our production process and strengthen our supply chain to keep up with the increased demand worldwide for our different tequila brands across all price points. As the leader, we have a responsibility to meet that growth without sacrificing agave quality or sustainable farming and production practices. We work closely with our agricultural team and the Mexican government to ensure that the land is cultivated properly, and resources are managed responsibly.”

As a category leader, Jose Cuervo “was the first tequila producer to find a sustainable use for the tonnes of agave byproduct, called bagasse, which gets produced by us and our industry every year,” Otegui adds. “For decades, we’ve used agave byproduct as natural fuel for our ovens and as compost in our fields. In 2019, we established ‘The Agave Project’ to commit to re-purposing or recycling 100% of bagasse — whether for fiber plastic alternatives, like drinking straws and cups — to donations to local artisans and engineers to use for paper products and building materials, and creative uses like surfboards, guitars and even car parts.”

“We also partnered with ITESO University in Guadalajara to build a house in Tequila, Mexico, made entirely from sustainable materials utilized or produced during the tequila production process, including bottles, bagasse, discarded barrels and more,” he continues. “We completed the home in 2022 for one of our jimadors, and it now serves as a prototype for future houses. Our ambition is to build more homes in Tequila and the surrounding regions in the coming years.”

At the tequila brand Cazadores, owned by Bacardi, “We’ve been preparing for this boom for several years, as we’ve seen the increased demand for tequila in the U.S. steadily increasing YOY,” says Ronan Beirne, Cazadores Global VP. They are monitoring the agave shortage “closely, and have a number of initiatives in place to support and protect the future supply of agave. This includes the introduction of a sustainability certification that sees us working with agaveros to help them improve their agricultural practices, which in turn helps them to increase the quantity and quality of the agave they produce.

“We also grow and mature a portion of agave, some of it on our own property (this was used for our first-ever limited-edition Tequila Cazadores 100 Year Estate Release that was released at the end of 2022) and have also implemented processes to reduce waste,” Beirne adds. “It’s important to remember it takes six years to develop a fully matured agave plant, so planning for the long-term is important to ensure agave/tequila supply for the future.”

The Tequila Cazadores distillery is an environmentally certified facility by local and international authorities, with “clean energy status” for best-in-class in environmental practices, Beirne says. Moreover, Cazadores has taken a number of steps and set pertinent goals with an eye towards sustainable solutions. These include:

Having their Blue Weber agave certified 100% sustainably sourced by 2025, including not damaging the soil or the aquifer system; converting leftover agave fibers without sugar into biofuel, which powers the biomass boilers used during the extraction, cooking and distillation processes, cutting greenhouse emissions by 80%; renewable energy now powers 99% of their distillery’s electrical needs; 100% of the cardboard in their packaging is certified sustainable; BIER (Beverage Industry Environmental Roundtable) named their distillery a “Top Performer” for their water efficiency processes.

The fast-growing tequila brand Codigo 1530 is another company whose sustainability efforts include repurposing agave fiber into products like straws and cups. They utilize a local labor force of jimadors, distillers, hand-bottling and distillery management to further reduce their carbon footprint. Additionally, the brand intentionally plants agaves along their property lines that are dedicated to flower — rather than to harvest — providing a food source for the local bat population pollinators.

Purchased by Pernod Ricard in the fall of 2022, Codigo 1530 was founded in 2016 by a team that includes country music star George Strait. Strait graduated college with a degree in agriculture before launching his successful singing career. (He’s also emblematic of the recent trend of successful alcohol brands launched by celebrities.)

“We quickly realized that after harvesting agave to distill Codigo 1530 Tequila, the remaining agave was only being used as mulch to top our soil for future plants or burned as a fuel source,” Strait recalls. “We are still using some of the excess agave fiber as mulch, and now have begun producing straws and cups in a sustainable and eco-friendly manner. This is a lifesaving program for sea life affected by plastic pollution.”

The Future of Tequila

With these measures in place, tequila brands remain optimistic about the future of the category.

“There have been a lot of predictions that tequila is poised to become the most popular spirit in the U.S. and 2023 might be the year that we see it come to fruition,” says Beirne of Cazadores. “It’s a very exciting time for the tequila category, and we anticipate increased consumer interest in the premium and super premium segments. Cristalino tequila is one to watch as well as other aged expressions.”

“In the RTD space, we anticipate more consumers will trade up from hard seltzers to RTD canned cocktails made with real spirits and high-quality tequila as bases,” he adds. “We’re already seeing some big hard seltzer brands reformulating or coming out with new spirits and tequila-based RTDs.”

Agreeing with this sunny outlook, thanks to sustainability, is Otegui, of Proximo Spirits.

“Agave supply chain and pricing continue to be a challenge today for all producers,” he says. “However, together with the Tequila Regulatory Council, other industry members and growers, we are becoming more sophisticated in our planning and forecasting models to mitigate shortages.”

“There are more agave plants on the ground than ever before,” Otegui continues, “and production capacity has been increasing consistently to catch up with demand.”