[Roy in Texas]

This is a reprint from a recent artical in the Dallas Morning News. In case some of you haven't seen it.


Emotions spill forth as Mexican distillers split over tradition, tweaking


10:00 PM CST on Friday, December 26, 2003

By ALFREDO CORCHADO and RICARDO SANDOVAL / The Dallas Morning News

ACATIC, Mexico – Carmen Alicia Villareal is typical of the changes rippling through Mexico's trademark tequila industry.

One of the few women executives in this traditionally macho industry, she has introduced a softer tequila that she says will attract more women to the ranks of aficionados.

Ironically, Ms. Villareal has "never had a drink of tequila" – not even the upscale drink that pours from the oak barrels of her San Matias distillery in this farm-studded valley outside of Guadalajara.

As mavericks such as Ms. Villareal move into positions of power in the tequila world, the industry is at a crossroads as it tries to find a balance between tradition and the need for change.

For years, producers have struggled to match supply with demand in the market while holding fast to the traditions of producing only the purest tequila.

In 1997, distillers found themselves fighting one another for dwindling supplies of the Weber blue agave – the only kind of agave plant that can legally be used to make Mexican tequila – when good economic times in the United States sparked a sharp rise in consumption. The United States consumes 83 percent of the tequila that Mexico exports.

And now demand worldwide is up again after a recession-driven flattening of sales trends in recent years. But agaves are hard to grow and take about seven years to mature.

So progressive distillers such as Ms. Villareal are pulling back tradition and toying with controversial genetic alterations of the plant to speed ripening. Their goal: smoothing out agave production cycles to stay in line with demand fluctuations without overproducing.

But that's only one in a number of challenges facing the industry. Producers have debated such issues as cutting the agave with cheaper distillates, flavoring the tequila and even bottling the product in the United States to cut down on costs.

Appalling practices

Tequila purists – makers and consumers of fine, aged tequila containing 100 percent agave juice – cringe at the growing practice of cutting the beverage with everything from sugar cane liquor to other types of agaves.

Then there is the growing fight over whether tequila should be distilled and bottled only in Mexico. A number of high-volume distillers are cutting costs by shipping tequila across the U.S.-Mexico border in bulk tankerloads to save money by bottling the beverage in the United States. Critics complain that the practice has invited pirating. They cite a jump in the seizures of bootleg tequila – often corn liquor flavored with tequila – along the border.

Mexico is lobbying Canada and the United States, its North American Free Trade Agreement partners, to help the tequila industry crack down on knockoff liquor labeled as tequila. Cooperation has been slow, Mexican tequila regulators complain. U.S. authorities have not acted against counterfeiters identified by Mexican officials.

But U.S. officials have offered one proposal that the Mexicans say will help: certificates of authenticity granted to shippers by the Mexican government and honored by U.S. and Canadian customs authorities.

While debate continues on several issues, the best news for U.S. consumers is the promise of stable prices in 2004.

Starting in the mid-1990s, prices soared along with tequila's popularity. But as the United States entered a recession, tequila prices began scaring off consumers. The trend worsened with the introduction of new liquor taxes in Mexico that again pushed up retail prices.

Agave cycle

Slackened demand was soon answered by a steep production decline.

Meanwhile, the millions of new agaves planted by farmers in response to the 1990s demand spike started to mature.

"We are either desperate for agaves or we have too many," Ms. Villareal said. "That makes it hard to sustain consistent quality control."

Manipulating the agave's genes is one of a number of technological tools that the industry is experimenting with to even out supply cycles.

Tequila traditionalists have scoffed at the idea of altering the agave's genetic profile, but others applaud distillers such as Ms. Villareal.

"We're not altering the taste of tequila at all," explained Gonzalo Fonseca Martin, who works at Tequila Pura Sangre. "We're simply looking to technology for help in eliminating the crises or at least controlling them."

While regulators have expanded their definition of tequila – allowing distillers to more deeply cut the beverage with non-Weber blue agave juice – they've also increased their control over who gets to grow agaves. Simultaneously, the government has pushed farmers to use satellites and computers to track the ripening of their crops.

But with supply in line with demand in 2004, the regulators – for now – are confident that instead of a schizophrenic business, tequila is more diverse now, with "a fan of options for the consumer on every end of the spectrum."

Tequila production for 2004 is expected to be 150 million liters from about 1,000 producers. The output is well off the 190 million liters bottled in 1999 but double the 1995 yield of 70 million liters.

Before the recent supply-and-demand crisis, higher-end distillers willing to pay more were buying more than a third of the agave crop, even though they accounted for a fraction of the industry's total sales volume.

Regulators changed that in 1998, and now boutique distillers – the producers who adhere to the "100 percent agave" rule for their tequila – get only 20 percent of the crop. The government also allowed greater mixing of low-end tequilas with everything from other agaves to sugar cane alcohol.

That move surprised analysts, who had seen Mexican regulators get nasty over lowbrow tequila knockoffs coming from countries such as South Africa and Israel.

But regulators defend their decision as necessary for the times.

"As long as it is Mexican tequila, from agave grown in the regions designated for tequila, I don't buy the argument that our quality reputation has suffered," said Ramon Gonzalez, president of the Tequila Regulatory Council. "The best tequila is the one the consumer decides to pay for."

Seeking balance

That balance is what Ms. Villareal is looking for.

The former marketing executive knows how to sell, and she's convinced that the industry has hurt itself by not expanding its horizons, even as its executives suffered whiplash after ups and downs in supply and demand.

"We have to recoup the industry and move beyond the crisis of agaves," Ms. Villareal said. "But we also have to capture the American consumer. And to do so, we have to rescue our own credibility and produce a product that's not just high on quality, but also reasonable on price."

Ms. Villareal's strategy appears to be working: Sales of her label, Tres Matias, increased 35 percent from 2001 to 2002. She credits the increase to aggressive marketing.

For Ms. Villareal, however, the trail to success has not come easy.

She took over the company after her husband, Jésus López Roman, was gunned down in 1997 in an ambush outside of his Guadalajara office.

The murder remains unsolved. But since it happened just as the industry began rancorous debate over its future, Mr. López's death sparked rumors that tequila factions were literally at war.

Mr. López Roman was a staunch advocate of quality over quantity. He openly railed against the industry's move to cut agave supplies to makers of upscale tequila.

The 38-year-old Ms. Villareal does not like to talk about her husband's death, saying the episode is too painful to keep revisiting.

She took up her husband's fight. But she's not shied away from change. She has "delicately" let go of a number of her husband's relatives, hired technology experts to streamline production and introduced that brand of tequila for women.

"Why not?" asked Ms. Villareal, through a slight smile. "We women can also suffer from broken hearts. We could also use a good tequila to accompany the pain."

E-mail rsandoval@dallasnews.com and acorchado@dallasnews.com

[reifer]

interesting article but, I don't know how much fact is involved. I am pretty sure that the idea that only 20% of the agave crop is "allocated" to produces of 100% is pure BS. As far as I know there is no body who "allocates" anything nor does the Mexican gov't have the ability to do it in my opinion.
As I am sure everyone knows San Matias is a mixto and has been for quite a while. Not a bad product but, mixto. At any rate it is amusing to characterize her as appalled at dillution practices. Efforts to genetically engineer agave is news to me but, that doesn't mean someone isn't doing it. But, why? What if they get the production time for agave down to 5 years? It won't matter. There are glut/shortage issues in the US on commodoties that grow every year. The one thing that is for sure is that shortage will soon be glut. These are farmers, afterall, that's what they do best.
The reference to "1000 producers" is ridiculous. There are only about 75 producers and a year ago, half of them were not in production. Assume some are back up but, it is a far cry from 1000. I frankly don't know if the other production stats are right. I am also puzzled at the idea that the rules for mixto have changed recently. Maybe but, I think that they have, unfortunately, always allowed dillution 51/49.
Rey Sol, is a fantastic product, if over priced. I don't know if the "Tres" Matias is a misprint or a product that I've never heard of? Not on their website either. I like San Matias anejo quite a lot even though it is mixto

[reifer]

Where are you from? Just curious. I live in Puerto Vallarta.

There truly was a shortage but as in all things agricultural supply is quickly moving toward glut. When prices got very high, everyone expanded planting. It is the universal plight of the farmer.
I haven't talked to anyone about pricing in 6 months or so. My understanding is that prices did get to $5000 to $6000 USD a ton. That's a metric ton, I guess or 1000 kilos. That would be something in the neighborhood of $5 to $6 a kilo. It is, however, also my understanding that prices are dropping rapidly. As I recall, 6 months ago the price was more like $2000 USD a ton which would be closer to your quote of $22 pesos per kilo. I would bet that prices are lower then that now, but, don't really know. It wouldn't surprise me at all that prices are down to $10 pesos a kilo or below.

[ianadmin]

reifer, on Jan 29 2004, 09:02 AM, said:

There truly was a shortage but as in all things agricultural supply is quickly moving toward glut.  When prices got very high, everyone expanded planting.  It is the universal plight of the farmer.

Increased planting was undertaken almost immediately, but another factor was in production. A lot of companies went over to making mixtos, lowering their demand on the plant. Problem seems to be sales: all those mixtos in fancy bottles don't seem to be selling so well. People still want 100% agave, but aren't as willing to pay the higher prices demanded by some producers.

Plus the fashion-fad of tequila seems to be dimming somewhat.