Recent times have brought to light the tequila boom all over the world that has also had a substantial impact on agave and its prices. A noticeable reduction in agave prices that are due to the decreasing demand for premium tequila has made certain investments essential in the marketing areas. This area is seen to have momentum based on its lower price points, improving quality ultimately leading to a strong growth potential.
One of the major causes for the plunging of agave prices are the increasing number of registered agave growers that have multiplied their number of plants in order to grow agave. According to data and industry reports price crashes will continue to happen along with the production of agave-related inventory keeping in consideration the fact that it takes years to grow the plant.
Over planting in this sector leads to the lowering of prices due to an increase in competition and multiple sources for supplying the commodity. While on the other hand, supply reduction is caused due to less number of growers present when prices are low, further pushing the prices to increase. This cycle happens repeatedly after every 10-15 years approximately which is why the near future will witness cheaper agave with a higher and better quality further resulting in a trading-down trend.
Additionally, this trajectory will see new brands and entities coming up that will balance out the price-to-quality ratio. Tequila brand owners should put in extra effort in these times of lower prices to invest in techniques that will make them stand out amongst other new-born, fresh brands. This promotional activity will parallely drive the trend of premiumisation as well. Margin preservation would be the utmost priority with premium and above products being in constant demand.
This rapid change in the price will prove to be an advantage for the growing markets across the Middle East, Asia Pacific, Africa and areas outside Mexico to reinvest the margin into campaigns as well as for the capital that is required for ageing. Companies are working on expansion of the product categories ; data records suggest that while Mexico and the US continue to dominate the global volumes for tequila, there has been an increase in the popularity of tequila and agave cocktails simultaneously in other parts of the world. Remarkably, the overall image of tequila is enhanced resulting in a boom.
