Understanding the factors that influence the value of tequila is crucial if you’re looking to profit from your investment.
We will explore what affects the price of tequila bottles and casks, starting with bottle prices and then examining what drives cask tequila’s value.
If you’re reading this article, it means you’re already set on investing in tequila. If not, make sure to check out why tequila investment is the next premium spirit to invest in.
Understanding the Influences on Tequila Bottle Prices
To fully grasp why some tequila bottles command higher prices, it’s important to know the different tequila grades: Value, Premium, High-End Premium, and Super-Premium.
Each grade has distinct characteristics that impact the value of tequila.
Value Grade:
- Composition: Typically mixto tequilas, made with 51% agave sugars and the rest from other sugars like corn or cane sugar. This was authorized by the Tequila Regulatory Council (CRT) in 1994 to help producers meet growing global demand.
- Production: Often uses industrial methods, such as diffusers, which extract sugars from younger agave plants (as young as 4 years) without cooking them. This method is often criticized for producing lower-quality tequila with less flavor complexity.
- Age: Unaged, known as Plata (Silver) and can use additives for colour, known as Joven (Gold).
- Labeling: Bottles that lack 100% agave content can only be labeled “tequila.”
- Cost: Least expensive due to perceived lower quality and higher availability, often used in cocktails or shots. Bottles typically cost between $10-$30.
How Cask Investment Influences the Thriving Tequila Industry?
While rising agave prices and production limitations pose challenges, innovative strategies like cask tequila investment are emerging to address these hurdles and fuel the industry’s continued premiumization.
Premium-and-Above Grades:
- Composition: Primarily 100% agave tequilas, representing over 60% of tequila sold today.
- Production: Utilizes traditional methods, either artisanal or semi-artisanal. Artisanal production involves slow-cooking mature agave (7+ years) in brick ovens and crushing with a tahona (large stone wheel), ensuring higher quality and complexity. Semi-artisanal methods might use autoclaves and mechanical roller mills.
- Age: Includes longer aging periods, with options like reposados (2-11 months), añejos (1-3 years), and extra añejos (3+ years). Super-premium tequilas typically start at añejo. No additives can be used to enhance flavour or colour.
- Labeling: Clearly states “100% agave” or “100% de agave.”
- Cost: Most expensive, particularly in the super-premium grade, due to perceived higher quality, brand prestige, and limited availability. Often enjoyed as sipping drinks for their complexity and elevated price point. Bottles in the super-premium grade often cost $150 or more.
Understanding Cask Prices in Tequila Investment
What Determines Cask Buy-In Prices?
Cask buy-in prices, much like retail bottle prices, are influenced by several key factors, including:
- Cost of Production: Rising raw material costs, such as agave prices due to undersupply. Aged tequilas like extra añejo will demand higher prices because they cost more to produce due to increased production times and require higher quality ingredients.
- Producer Reputation and Methods: Tequila crafted with 100% agave and traditional methods commands a higher buy-in price due to its perceived higher quality and lower availability.
- Industry Dynamics: Unlike retail bottle prices, where variations are significantly influenced by the bottling brand’s prestige, cask prices are more consistent across producers since brands can source tequila from any distillery. This results in less variation in cask prices from different producers compared to retail bottle prices.
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How Does a Casks Value Increase?
The primary benefit of investing in casks is the potential to profit from the maturation process. As tequila ages, its value increases due to enhanced quality, higher demand, and scarcity.
Investors can purchase blanco tequila and age it for one year to become añejo or for three or more years to become extra añejo, optimizing their returns.
A standard cask of tequila, known as a barrel, contains approximately 200 liters of tequila, which equates to around 285 bottles at 70 cl each.
Despite some losses due to evaporation, known as the ‘angel’s share,’ the value of each bottle increases significantly as the tequila ages in the cask.
Investors can sell their casks of aged tequila to brands at a higher price, allowing these brands to then offer aged tequila at premium prices in the retail market.
Start Your Tequila Investment Journey
At GORDON, we provide our clients with the opportunity to invest in casks of blanco tequila, guiding them through the purchase and resale process within a strategic 1-3 year timeframe.
If you’re interested in learning more about how you can start your journey into premium cask tequila investment, get in touch with us and fill in your details.
Our team is ready to provide personalized advice and assistance tailored to your investment goals.
Discover the lucrative opportunities in this thriving market and embark on your rewarding investment journey today!