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What are the economics of the tequila industry, of a $40 bottle, how much does it cost to produce, how much does the retailer get, producer, and distributor? (US brands importing from Mexico)
Hello! Thanks for your question about the economics of the tequila industry. The most useful sources I found to answer your question were various analyses of the US alcohol distribution system. The short version is that production costs are around $6, the producer gets $9, $6 will go to importers, $6.30 will go to distributors, $8.19 will go to the retailer, with a final $4 going to taxes.
Below you will find a deep dive of my findings.
FINDINGS
The most precise breakdown that I found was provided by tequila brand VIVA XXXII. According to the company, a $39 bottle of tequila breaks down into the following costs:
- Tequila ($3.50)
- Bottle ($2.50)
- Taxes ($4.00)
- Retailer/Distributor Mark-up ($20)
- Producer Mark-up ($9)
I didn't particularly love this source, so I conducted some additional research to support these numbers.
Unfortunately I was unable to find specific statistics regarding spirits distributors; however estimates for the three-tier system (producers, distributors, and retailers) for wine indicated that the distributor typically seeks 28-30% margins, while the retailer will seek 30-50% margins.
If we apply these to the above numbers, we get $6 for the original product (tequila+glass), plus the $9 mark-up for the producer, giving us a $15 product when it is sold to the distributor. The distributor adds 30%, bringing our bottle of tequila up to $19.5, at which point it is sold to the retailer. The retailer then ads an additional 50% mark-up, bringing our product price to $29.25. If we add the $4.00 in taxes, that brings our product to $33.25 (which is still considerably lower than the $39 target).
That said, depending on the state, taxes may be higher, and it was unclear whether VIVA XXXII estimate included importer costs, etc. For example, another resource that I located (which again was not particularly reputable in my opinion), put the importer's margin at around 40%. If we apply this to the figures provided by VIVA XXXII, we get the following figures:
- Product cost ($3.50+$2.50) = $6
- Plus producer margin ($6+$9) = $15
- Plus importer margin ($15 + 40%) = $21
- Plus distributor margin ($21 + 30%) = $27.3
- Plus retailer margin ($27.3 + 30%) = $35.49
- Plus taxes ($35.49+$4) = $39.49
This brings us much closer to the figures outlined by VIVA XXXII (with total importer/distributor/retailer margins at a total of $20.53). Unfortunately all the mark-up for each individual category is going to change based on a lot of different factors (dynamics with importers, distributors, retailers, taxes, etc.); however, generally speaking, based on a $40 bottle of tequila, it seems as if the figures provided by VIVA XXXII are largely accurate.
CONCLUSION
To wrap it up, on a $40 bottle of tequila, approximately $6 will be in production costs, $9 will go to the producer, $6 will go to importers, $6.30 will go to distributors, $8.19 will go to the retailer, with a final $4 going to taxes.
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