Is Tequila’s Reign Coming to an End? Unpacking the Industry’s Next Big Challenge | CNN Business

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The tequila industry is facing tough times, even with celebrity brands like Kendall Jenner’s 818 Tequila. After four years of rapid growth, the company is scaling back its hiring and marketing. It’s a sign of the larger challenges brewing in the tequila market.

Mike Novy, CEO of 818 Tequila, mentioned that people are now more thoughtful about their spending. “We’ve observed a pull-back on discretionary spending and an increase in more deliberate purchases,” he stated. Their focus is on offering customers the best prices for their core tequila lineup.

This year has been difficult not just for 818 Tequila, but for the entire tequila market. A report from OhBev revealed that tequila is at a “critical juncture” with signs of market normalization after a decade of dizzying growth. It’s noticeable that consumers aren’t buying as much tequila now compared to the pandemic when many stocked up their home bars. This shift is leading to layoffs across the sector.

In addition, years of high demand have resulted in a surplus of agave, the primary ingredient for tequila. This oversupply is pushing prices down and hurting profits for farmers.

Looking to the future, there’s also the potential for tariffs on tequila, as it’s exclusively produced in Mexico. Current trade agreements allow for tariff-free imports, but this may change soon, adding to the uncertainty.

Andrew Chrisomalis, co-founder of Pantalones Tequila, shared his insights as well. He says that consumers are shifting back to pre-pandemic spending habits. They’re less inclined to splurge on high-end bottles, seeking instead high-quality tequila at reasonable prices. This trend favors brands like Pantalones, which offers a 750ml bottle for $45.

The economic climate has made consumers more cautious. “Discernment would be the key word,” Chrisomalis noted. Brands that stand out with quality should do well despite these challenges.

For now, the current tariff situation remains stable, which helps alleviate some immediate concerns. However, uncertainty still looms over the market.

With the U.S. accounting for 80% of tequila imports, companies like Pantalones and 818 Tequila are building up their supplies. This year, tequila exports from Mexico increased by 30% in January compared to last year, according to data from Mexico’s Tequila Regulatory Council.

To expand their reach, Pantalones is eyeing the U.K. They recently secured a distribution deal with Tesco, allowing them to sell in about 2,500 stores. Tequila is still a burgeoning market in the U.K., so Chrisomalis believes there’s a need to educate consumers. They’ll be holding tastings to showcase their varieties and use McConaughey’s fame for promotion.

As the tequila market navigates these shifts, adaptability and quality will be essential for survival. The landscape may change, but the passion for tequila remains strong among its fans.

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