Is Tequila’s boom running dry?

The tequila category has enjoyed substantial growth in recent years, fuelled by premiumisation, celebrity-backed brands, and global demand. But with agave supply swings, market saturation, and shifting consumer trends, could the sector be heading for a correction? 

Agave supply: from surplus to shortage

Tequila’s popularity has driven a cycle of volatility in agave pricing, with dramatic fluctuations over the past decade. In the late 2010s, surging demand led to a shortage, pushing agave prices as high as 35 pesos per kilo. This incentivised overplanting, and now, as those crops reach maturity simultaneously, an oversupply has caused prices to tumble, ISWR and Grand View Research found. The result is a precarious situation for farmers, many of whom are now struggling to break even. Meanwhile, producers that rely on consistent agave quality face uncertainty as the supply pendulum swings. Some major brands have invested in long-term supply chain solutions, but the wider industry remains vulnerable to these cyclical disruptions.

Market saturation and a changing consumer landscape

A proliferation of tequila brands, many fronted by celebrities, has intensified competition. While premium and super-premium tequilas remain strong, early signs of a slowdown are emerging. According to IWSR data, tequila volumes in the US declined by 1% in early 2024, with the ultra-premium segment dropping by 8%. This suggests a possible cooling-off period after years of rapid growth.

The tequila boom has been largely driven by North American consumers, but producers are increasingly looking to expand in Europe and Asia to sustain momentum. However, these markets have yet to fully embrace tequila at the same scale, raising questions about long-term demand.

Sustainability and the future of the category

Beyond market fluctuations, sustainability concerns loom over the industry. The rapid expansion of tequila production has increased pressure on agave cultivation, with reports of deforestation and strain on local ecosystems in Jalisco, Mexico. Producers are beginning to implement more sustainable practices, but the challenge remains in balancing long-term environmental responsibility with continued growth. The industry must also address consumer demand for transparency, as educated buyers seek assurance about ethical sourcing.

Is Tequila at a turning point?

The tequila category is far from collapse, but its explosive growth phase may be reaching a turning point. As the market matures, brands will need to differentiate beyond celebrity endorsements and focus on quality, sustainability, and global expansion. With supply chain instability and evolving consumer trends, the industry must navigate carefully to maintain its hard-won position as a global spirits powerhouse.