Market Watch, April 2018
APRIL 2018 MARKETW ATCHMAG COM MARKET W ATCH 51 PHOTO BY RICHARD ELLIS ALAMY outside Mexico He notes that the increased value in cultivating agave will provide economic incentive for new growers which will ultimately set up the category for ample supply in the future Danny Mena a founding partner of Mezcales de Leyenda imported by M S Walker believes that the Espadín agave supply in Oaxaca is reaching equilibrium with demand He says that in other mezcal producing Mexican states like Durango and Guerrero agave pricing has only increased 10 over the last five years while in Oaxaca the price has nearly quadrupled over the same period Mena also notes the Espadín price surge hasnt had a serious impact on Mezcales de Leyenda because it sources a diverse selection of agaves from throughout Mexico the Oaxaca bottling is 65 a 750 ml But for sister brand Pelotón de la Muerte mezcal 30 which is made from 100 Espadín the agave price surge has been painful So far the brand owners are absorbing the agave price hike but they fear they may have to raise the consumer retail price soon Unfortunately were in a very price sensitive area of the market so we have very little wiggle room says Mena He adds that producers have to take a long term outlook when it comes to agave supply Agave takes seven to nine years to reach maturity Mena says As agave prices rise people plant But theyre investing in a crop that doesnt yield any money for almost a decade As supply blooms pricing drops And when pricing drops too much farmers plant other crops that can yield income in six months so supply becomes an issue again in seven years Then the price increases again and people plant again Its a cycle we see a lot in Tequila and one I expect to see in Oaxaca for Espadín agave Ilegals Rexer adds that the current agave shortage can be traced in part back to the 2007 ethanol boom during which many growers planted corn instead of agave The reduction in agave plantings in 2007 and 2008 is being felt today And compounding the mezcal agave supply shortage is the rise in popularity of non alcoholic agave syrup Ironically the agave required to produce the sweetener which is often mixed into mezcal cocktails in the on premise is causing problems for mezcal producers Some brands mitigate supply issues by signing long term contracts with agave growers thereby creating some stability for their products Sombra mezcal owned by Davos Brands is a prime example Davos vice president of marketing Joen Choe says 2018 is shaping up to be a challenging year for agave supply but he adds that established brands should have a solid As mezcals popularity increases traditional milling process above agave supply issues are also growing
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