How Cask Investment Supports the Tequila Industries Growth

The tequila industry has swiftly emerged as the premier spirit globally, outpacing established contenders in key alcohol markets like the United States, where it surpassed whiskey sales in 2022.

In 2023, global sales soared to a record-breaking $16.5 billion, with projections indicating a robust compound annual growth rate (CAGR) of over 11% until 2032, expected to culminate in sales reaching $42.5 billion.

This exponential growth owes much to premiumization and the supremacy of high-quality, well-aged tequilas within the premium-and-above categories. Future expansion is anticipated to be most pronounced outside the United States in other pivotal alcohol markets such as Canada, the UK, and Australia.

Nonetheless, the industry contends with meeting demand requirements amidst escalating production costs, supply chain constraints, and evolving production standards.

In this article, we will delve into the pivotal role investors can assume in bolstering the tequila industry and positioning themselves as pioneers in the burgeoning premium tequila market.

Understanding the Tequila Industry Dynamics

The tequila sector encompasses agave growers (Jimadores), distilleries (tequileras), and brands. Traditionally, distilleries contract growers for agave and produce tequila for both their proprietary labels and other brands.

Intriguingly, most of the world’s renowned tequila brands do not own their distilleries, relying instead on independent distilleries for production. 

Mexico boasts approximately 75 active tequila producers, around 2,800 brands, with merely 13 of these producers crafting tequila exclusively for their own brand.

This means the industry depends greatly on the farmers and distilleries to produce the tequila that keeps the market running.

Navigating Challenges and Investor Intervention

The demand for Añejo (age 1-3 years) and Extra Añejo (age 3+ years) tequila is skyrocketing, but production faces significant hurdles.

1. Agave Growth Cycle: The blue agave plant takes seven years to mature, compelling distilleries to sell Blanco (age 0-2 months) tequila immediately to maintain cash flow. This is done either by bottling it under their own brand or selling it in bulk to other brands. Distilleries also have extremely limited storage capacities which they will use for aging their own tequila.
2. Aging Constraints: The majority of brands (95%) do not produce their own tequila and lack storage facilities, making it difficult and expensive to age their own tequila. As a result, their business model relies on purchasing ready-to-bottle unaged or aged tequila.
3. Financial Preferences: Both distilleries and brands aim to avoid the financial burden associated with aging tequila. Distilleries focus on selling Blanco tequila for immediate revenue, while brands prefer to buy tequila that is ready for bottling.
4. Explosive demand: Increased demand for aged tequilas is driving market growth, yet overall demand across the tequila market is reaching unprecedented levels and is projected to soar exponentially over the next decade. This surge in demand also intensifies the need for younger tequilas, posing challenges for distilleries and brands aiming to produce aged tequila.

A compelling indicator of shifting consumer tastes is the burgeoning dominance of the super-premium category, predominantly comprising añejo or extra añejo tequilas, commanding prices exceeding $150.

Projections suggest that by 2026, this category is anticipated to command a 40% volume share and a 55% value share of the market, a substantial increase from 13% and 33% respectively in 2016.

The Vital Role of Investors in the Tequila Industry

These market dynamics create a unique opportunity for investors.

By purchasing Blanco tequila, investors support distilleries with immediate sales and can later resell the aged product to brands seeking aged tequila to meet market demands.

Market data indicates that investing in tequila’s aging process can be highly lucrative over a short 1-3 year period, with prices rising significantly within this investment horizon.

Discover how tequilas value increases in the cask.

Start Your Tequila Investment Journey

To learn more about how you can participate in the thriving tequila industry through cask investments, get in touch with us today.

Take the first step towards seizing this exciting opportunity and partnering with us in shaping the future of premium tequila.