The Tequila Curse

U.S. demand for tequila has made the Mexican agave crop a $1.6 billion business. Have producers sown the seeds of disaster?
In Guadalajara’s old city, a bartender at Cantina La Fuente, one of the tequila region’s oldest drinking establishments, pours a shot of 100 percent agave tequila Photograph by Elliott D. Woods for Bloomberg Businessweek

Every year on the Day of the Dead, Guillermo Erickson Sauza invites family and friends to join him at the graves of his great-great-grandfather, Don Cenobio Sauza, and great-grandfather, Don Eladio Sauza, in the Panteón de Mezquitán in Guadalajara. The streets outside are packed with vendors selling skull candles, skeleton dolls, and loaves of bread baked into the shape of crossbones. Visitors throng at the wrought iron gates, so Erickson Sauza sprinkles a trail of marigold petals for his guests to follow and drapes his ancestors’ crypts with bright-orange garlands and wreaths arranged to read “Familia Sauza.”

At the head of each grave, Erickson Sauza sets out bottles of his own tequila, made according to Don Cenobio’s recipe and distilled on the family estate in the very copper pots Don Eladio purchased in 1903. But Erickson Sauza’s adherence to tradition is shot through with a bitter irony. He does not hold the legal rights to the likenesses of his grandfathers; the Sauza family name belongs to Beam, the global liquor conglomerate headquartered in Deerfield, Ill. Erickson Sauza’s tequila is Fortaleza (“fortitude” in English), and his small, independent distillery produces only 8,000 cases of it a year.

Erickson Sauza’s family didn’t lose commercial rights to its name for lack of foresight. Erickson Sauza, 57, recalls how his grandfather, Francisco Javier Sauza, the third-generation don of Sauza Tequila, took him into the agave fields at age 7 and lectured him on looking after the land and the agave—“our lifeblood.” And Don Francisco fought hard to protect their heritage. Seeing liquor stores from Europe to Japan jammed with knockoff tequilas in the late 1960s, he pressed for the creation of the appellation of origin, eventually registered with the World Industrial Property Organization, requiring that any spirit calling itself tequila be made from blue agaves grown in the State of Jalisco and distilled according to standards set by a regulatory commission. In 1973, Don Francisco produced a special line of tequilas, Tres Generaciones—one of the first premium sipping brands sold to a mass market—to celebrate a century of Sauza family manufacturing.

But after his only son, a recovering alcoholic, opened a drug-and-alcohol treatment center in California and refused to take over the business, Don Francisco in a fit of pique sold an interest in the company to Spanish brandy producer Pedro Domecq. The Sauza factory at the La Perseverancia estate in the village of Tequila stood empty within a decade, its door hung with a sign claiming “closed for repairs”—while longtime competitor José Cuervo thrived just down the cobblestone street. In the late 1980s a bacterial infection hit the agave crop, and Don Francisco sold his remaining interest without consulting anyone in the family. The only time Erickson Sauza dared to ask his grandfather why, the austere old man peered out from behind his newspaper. “Porque yo quería,” he said—“Because I wanted to.”

At first, Don Francisco’s unilateral decision looked like a stroke of genius. Mexico’s severe economic downturn of the ’80s sent tequila’s domestic sales into free fall; 40 percent of all tequila producers failed. Established distilleries weathered the crisis by reducing costs (and quality) of their product and emphasizing export sales, especially to the U.S. Aided by the invention of the frozen margarita machine and the rise of chain Mexican restaurants such as Chi-Chi’s, tequila flooded the American market. And the mass producers, dependent on an unpredictable agave crop, kept reducing the quality of their product to keep volume up.

Photograph by Elliott D. Woods for Bloomberg Businessweek

Today the tequila industry says it has overcome its boom-and-bust cycle through industrial agriculture and what Eduardo Orendain, president of the National Chamber for the Tequila Industry, calls “careful planning.” Officials at the chamber point to the current oversupply of agave and increased number of 100 percent pure blue agave tequilas, such as Patrón, Casa Dragones, and Casamigos, as evidence that their product is improving. Indeed, the revived empire of Sauza Tequila, sold by Pedro Domecq to Beam in 2011, now ships more than 2 million crates a year. In all, the industry produces 300 million liters of tequila per year, earning revenue of 21 billion pesos ($1.6 billion) in 2012, according to the chamber.

To slake North America’s seemingly bottomless thirst (sales have almost tripled since 1995), and to meet growing demand in Asian and European markets, tequila producers have tripled the production of pure agave over the past decade through new growing, production, and distillation methods. But these methods, scientists warn, have left the region vulnerable to severe ecological impacts. Connoisseurs, meanwhile, complain that tequilas produced by the new methods are of such low quality that they can be enjoyed only by the frozen margarita crowd. After decades of focusing exclusively on increased foreign sales, tequila producers may finally be forced to ask: How big is too big?
Agave is a desert succulent with rosettes of leaves that come to points sharp enough that they were used by native peoples as needles. In the wild, it sends up a single flower stalk like a giant asparagus that can reach seven feet and blooms before the entire plant dies. Looking out over his rows of blue agave, José Guadalupe Robles Guzmán explains that he’s one of the few growers from whom Erickson Sauza buys agave for Fortaleza. Robles, 58, is silver-haired and browned by the sun, and he speaks in a thoughtful, searching tone. He serves as the head of El Barzón, a union of agave growers he helped found in the mid-1990s to give farmers bargaining power with large tequila producers. By design, his farm operates much as it would have a century ago.

Because agaves mature at different rates and must be harvested by hand, field workers called jimadores still use coas—round, razor-sharp blades on long wooden handles—to shear off the needle-like leaves. After the plant has been reduced to its round heart, nicknamed a piña for its resemblance to a pineapple, the jimadores undercut the root and chop the plant in half. The whole process must be carried out by skilled laborers, who select ripe plants from amid the rows. The two men working for Robles today are seasoned—both have spent more than 15 years in these fields—and they move up the slope, shaping and splitting piñas with lightning efficiency.

“We used to clear rows with just the coa itself,” Robles says. In the ’90s many producers began using herbicides and pesticides, and even, at the urging of Monsanto and other U.S. agricultural companies, experimented with irrigation. It not only yielded inferior agaves but also led to widespread erosion and water-quality problems. “So a lot of people have been going back to doing everything by hand.”

The most radical change in recent decades, however, may be the way field hands reproduce plants. Rather than allowing each rosette to send up its distinctive flower—attracting pollinating birds, bats, and moths that come to feed on agave nectar—today’s growers hack off these woody shoots as soon as they begin to sprout. The idea is simple: If the agave isn’t expending fructans to grow a flower stalk, then those starches will remain in the piña and yield more distilled tequila. This technique is made possible by an evolutionary peculiarity of the agave. In addition to reproducing sexually, the plant will send up hijuelos, asexually produced offshoots also called pups. Surging demand created by the North American Free Trade Agreement and the booming American economy in the mid-’90s encouraged growers to uniformly cut off flower stalks and rely almost solely on pups. Overuse of asexual reproduction created whole fields of genetically identical blue agaves, leaving Tequila’s crops unusually susceptible to bad weather, disease, and infestation.

The high-risk growing practices created shortages and gluts, depending on the year. In 1997 snowstorms in Los Altos, a major agave-producing region east of Guadalajara, killed about 20 percent of the overall crop. By 2000 the lack of agaves sent the price of tequila soaring. Increased demand encouraged droves of farmers to plant fields, creating an oversupply by 2005, and prices crashed again. Worse still, those overcrowded fields of clone agaves sped the spread of a series of aggressive fungal infections that caused wasting rot, known collectively as tristeza y muerte de agave (the wilting and death of agave). In 2007 and 2008 wide swaths were burned to protect healthy plants, again causing the supply pendulum to swing. Most challenging of all for distillers dependent on agave, the plants typically take six to 10 years to reach maturity, so shortages because of crop loss are only felt much later—forcing larger producers to store tequila reserves to maintain supply through lean years. Annual fluctuations such as these are typical in the wine and spirits industry, but only tequila relies on such a disease-prone crop in such a densely planted region.

Despite these challenges, the tequila industry was carried through peaks and valleys by unflagging U.S. demand, so many growers have simply planted more agave—and spaced their plants farther apart. While this practice may slow the spread of disease among commercial agave and insulate growers against crop loss, José Antonio Vázquez-Garcia, a professor at the Institute of Botany at the University of Guadalajara, cautions that cultivation of Agave tequilana Weber—one species and variety of agave among more than 150 species and some 400 varietals—is inevitably crowding out other native species, some of which are endemic to Jalisco. In recent years, Vázquez has described nine new species of agave, several of which, he says, could be used in production of tequila and other mescals, but they exist in cultivation only at his agavarium at the university and a similar garden maintained by the Tequila Regulatory Council.

Vázquez says the dangers of today’s agave monoculture are more than agricultural or even environmental. For small farmers, many of whom gave up subsistence for the promise of the blue agave cash crop, the 3 million hectares (7.4 million acres) now under cultivation mean that prices have declined and are likely to stay down unless there’s a large-scale disaster. And it would be risky and costly for farmers to return to subsistence growing, because the sprawling fields of asexually reproducing agaves have created an invisible natural barrier to migratory pollinators. Recent research suggests that Mexican long-nosed bats, for example, are following new annual paths, so small farmers have little choice but to continue to raise agave.

“The campesinos thought that tequila was going to be blue gold for them,” Vázquez says, “but it has become a curse.”
At the nursery and research laboratory for Beam’s Casa Sauza, just outside the village of Tequila, José Ignacio del Real Laborde, the company’s technical director, ducks under the wall of a black mesh canopy that spreads for 40 acres, shading the 50,000 agave pups growing underneath. “They all look very similar,” says del Real, “but there are 400 different mother plants.” Del Real is well aware of the concerns botanists, ecologists, and tequila connoisseurs have about his crop.

He bends down to a row of agaves, each individually potted, and scoops one up for closer inspection. “What is a plant?” he muses. It’s like a remarkable machine, he says, converting the sun’s energy and the earth’s nutrients into carbohydrates. When both are abundant, the agave will use those carbohydrates for new growth, but during times of scarcity, the plant turns conservative. “So we restrict about 20 percent of the light,” del Real says, “and the plant knows not to grow large leaves, but instead to store its sugars in the stem.”

This small, counterintuitive trick is one of numerous innovations instituted by del Real, who holds a Ph.D. in plant science from Utah State University, since he was hired by Sauza Tequila in 1999. Barrel-chested with thick, expressive eyebrows and a quick wit that bounds between data and philosophy, he has turned the art of agave production into a methodical agriscience, advancing well beyond conventional spray-and-irrigate efforts. Today, all of Sauza Tequila’s agaves—some 15 million plants—begin with two to three years in del Real’s greenhouse. They’re moved to open fields according to a schedule, determined by past productivity of that particular region and company projections of sales over a 10-year period. When the right time is selected, each pup will be planted according to a global positioning system-created map and linked to a log of monthly field surveys. The health assessment of each field then determines a disease-, weed-, and pest-management plan.

Del Real wrote the book, literally, on modern agave crop management, and he has developed field guides for Sauza Tequila’s workers: to identify plants they can harvest and eat and to spot and collect flowering plants they can transplant to their gardens. He has spent more than a decade developing pesticide-free management techniques, such as pheromone-baited traps for the agave weevil and the promotion of beneficial insects to reduce fungal infections. Most important, he has established a science-based culture of cooperation, where researchers from major tequila producers—Cuervo, Herradura, Orendain—share knowledge and learn from academic researchers through conferences and jointly published handbooks available to everyone. In a densely packed growing zone, where competitors’ crops often share a fence with each other, it doesn’t make sense to keep an effective method secret from your neighbor. “If everybody doesn’t do it,” del Real says, “then we’re all going to have trouble.”

Even Erickson Sauza, the boutique distiller, agrees that it’s vital for the large producers to be experimenting with methods that produce more predictable yields. “When the big companies sneeze, everybody gets blown over,” he says. If there’s an agave shortage, the large distillers simply pay premium costs (typically with backing from their international ownership), driving up input costs for everyone else. “The big brands use 400 to 500 tons a day, so if they don’t do their planning correctly, they create a nightmare for everybody,” Erickson Sauza says.

The high-tech methods used by big producers extend well beyond the fields. Inside Casa Sauza’s tequila factory in the heart of town, every industrialized method has been embraced—and it shows in the gleaming stainless steel equipment and nonskid floors painted with caution markers for danger zones. Here agave piñas are pulped in a shredder, carried by conveyers to a “gentle extraction” diffuser (which del Real likens to a coffee brewer), and then steamed in high-pressure autoclaves. The juice, or aguamiel, is then pumped into gargantuan carbon dioxide-controlled vats for fermentation and distilled in 4,000-liter (1,000-gallon) column stills. Sauza Tequila makes no effort to disguise its industrialized product, even prominently marking large holding tanks “corn syrup” in the part of the factory where low-purity mixtos are produced. Indeed, the most disconcerting part of Sauza Tequila’s facility is the mechanical roar and general absence of human workers. But to del Real, this is evidence, as he told Wine Inquirer magazine, that their processes “are on the cutting edge of industrial sugar extraction technology.”

Tequila connoisseurs complain these techniques yield a product that has to be mixed into cocktails or aged over years in old Jim Beam bourbon barrels and sold as pricier añejos to be enjoyed straight. But del Real says the evidence of the product’s quality is in the numbers: “Our operation runs about 400 tons of agave per day and normally runs 309 or 310 days. So we’ve been processing 120,000 tons per year.” The industry produces 300 million liters of tequila each year. Although 20 million come from Sauza’s sole distillery, the company is still working to catch up to José Cuervo. Cuervo sends 50 million liters each year to the U.S. alone.

As for the environmental concerns of critics such as Vázquez at the University of Guadalajara, del Real turns philosophical again. “Agriculture is always an environmental disturbance,” he says. “Corn didn’t evolve to make tortillas. Agaves didn’t evolve to make tequila. They evolved to survive—and the balance that exists in nature, for survival, is rich between the species. Once man introduces agriculture, that is a disturbance. How to restore balance, that is my goal, but I also have a goal to feed a distillery that demands 400 tons per day. So I have to juggle those two things.”
At the tiny Fortaleza distillery, Jorge Eduardo Rodriguez, chief of production, sits on an overturned bucket, watching as a tiny electric tractor tugs a giant stone grinding wheel, known as a tahona, in a circle, pressing the juice from a fresh batch of baked agave. Two men in rubber boots wade into the pit using pitchforks to separate out the unwanted piña fibers. The juice is chocolaty brown, and the room is filled with an almost overpoweringly sweet smell reminiscent of baking yams. In its scale and pace, the scene couldn’t be a greater contrast to the Beam-owned factory. “We cook in the brick oven,” Erickson Sauza says, “and the cooking time is over 30 hours. We get steam to cook it from the boiler. Then we chip it into smaller pieces and stone-crush it.” When all the juice has dripped out of the separated fibers, the workers crank open a head gate and let the aguamiel flow out and into a wooden fermentation vat, where it will sit for three more days. “The big boys have improved all this,” Erickson Sauza says, but he still remembers his excitement in 2002, when he ran his first 10 liters through the system. “We didn’t even have anywhere to put it,” he says. “The tequila started coming out of the still—and we hadn’t thought that far ahead! We got 10 of these glass water jugs and tasted it coming right out of the still. And what went through my mind was: It’s been 100 years since anyone’s tasted tequila like this.”

Erickson Sauza knows that nostalgia alone won’t save the tequila industry. The old-fashioned methods of Fortaleza unquestionably produce a better product—maybe the finest in a very crowded market. (In particular, the reposado, allowed to “repose” for six months in barrels, retains the sweet smell of the distilling room and carries the distinctive taste of caramelized sugars with hints of vanilla.) But Erickson Sauza’s few hired men, working on century-old equipment, produce roughly the same amount in a year that Sauza Tequila produces each day. Such methods will never meet the demand that cheap tequila has created.

In most markets, that’s no problem; there’s plenty of room for boutique products to coexist alongside mass-market ones. But in an industry where all distillers depend on the health of the same crop, the safety and effectiveness of the new growing methods—and the effects of continued expansion fueled by new production and distillation methods—will determine the future of all market sectors. That’s why Erickson Sauza says he relies primarily on his own blue agaves and a few trusted sources such as Robles. Traditional methods may not be as efficient as industrial techniques, but they’re time-tested—their sustainability proven over generations. Even if the new agriscience doesn’t pose an imminent threat, Erickson Sauza contends something is still lost, and his company offers a margin of safety. The old ways might require more work, but it’s adversity and effort that yield the best tequila. “I could buy a larger distillery and start making a midrange product,” he says. “But I think I’m making the best tequila right here, and I get a chance to walk in the footsteps of my grandfathers. My great-great-grandfather, mi tatarabuelo, he walked around here over a hundred years ago, and we’re still here making his tequilas today.”