High agave prices aren’t the only factor driving up tequila manufacturing costs. Producers point to a number of issues, mostly related to the pandemic, that are making it harder and more expensive to source bottles, print labels and ship produce.
“Covid restrictions prevented many businesses from operating for a period of time and then many were granted (permission) to operate under certain restrictions, such as reduced staff and social distancing,” explain Steffin Oghenevice president of business development at Tequila El Tequileno.
This had a ripple effect and many tequila producers had to go to new suppliers due to lack of availability, he adds.
Glass bottles are just one of the necessary supplies that are more difficult to obtain, due to pandemic shutdowns and extreme weather in Texas, which has cut off gas supplies from Mexico for some time. , forcing some glass manufacturers out of business. These factors have led to a 40% decrease in glass production this year.
Another challenge faced by almost every industry is the reduction of shipping routes and lack of cardboard boxes and containers to ship products.
“Cardboard prices have doubled and we can’t find wooden pallets to ship our tequila. We had to buy plastic pallets,” says Felipe Camarenaowner and master distiller of the El Pandillo distillery in Jesús María, Jalisco.
The shortage of cardboard is increasing pin at least partly due to the abundance of online orders that have been made during Covid lockdowns around the world, eating away at existing supply.
As for pallets, lumber prices have risen in many countries as demand for new homes and renovations in the United States and elsewhere has soared.
According to Camarena, construction in the tequila region has also resulted in a shortage of workers at distilleries as agave growers, with cash on hand thanks to sustained high agave prices, decide to invest their earnings. into new homes and businesses.
Another unpleasant surprise for producers: the rise in the price of copper, essential for the manufacture of artisanal stills.
“Copper prices are up 85%, making it very expensive to add capacity in a high demand environment,” Camarena says.
Like many other tequila producers, it has seen sales surge in the past year as consumers shift from buying shots at bars to buying bottles for home. And the popularity of tequila has still not wavered. To secure its future capacity, Camarena recently invested in a new 5,000 liter copper still, despite soaring costs.
In the face of these widespread cost pressures, it’s no surprise that some producers have raised prices to offset their higher production costs. At El Buho At a tequila store in Tlaquepaque, vendors say many brands have recently raised prices, some by as much as 20%.
Meanwhile, other brands like El Tequileño and Tapatiohave maintained their pre-pandemic prices, hoping that life will return to normal.
But even as supply chains recover, growers’ biggest expense remains sourcing agave, which still stands at 27 pesos/kilo.
“Our number one cost is still high,” says Guillermo Erickson SauzaOwner of Tequila Fortaleza. “Ten years ago, it cost us about $1,875 to fill our small oven (15 tons). Today, it costs us about $22,500,” he adds.
Although one would think agave prices would drop during the pandemic, when outlets were closed, the unexpected surge in demand kept prices high.
Fortaleza’s other supply costs, such as bottles and cartons, have not yet increased as they are under contract, Sauza added, but that could change soon.
The lack of mature agave (7+ years) also increases costs for some growers, allowing tequila makers to achieve a higher yield because mature agaves contain more sugar that can be converted into alcohol. Truly sweet agave can make a substantial difference to growers’ bottom lines, allowing them to increase yields by around 30 percent, Sauza says.
However, 5 and 6 year old agaves are the only thing most distilleries have access to right now. These last years are when the plant produces the most sugar.
On a recent visit to El Pandillo, we saw Camarena inspecting some cooked agave fresh out of his oven. It was from his last field of fully mature agave. THE pinas were dark with caramelization and sweet agave juices flowed from the leaves as we tore the pieces to taste.
“It is really nice. I should get a pretty good return,” Camarena said. In these expensive times, every gesture counts.