Mezcal Industry

Part
01
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Part
01

Mezcal Industry: Overview

Mezcal is any spirit produced from the agave desert plant, which has close to 200 types. It can be made from about 30 agave varietals, particularly agave Espadin. Due to the widespread popularity of the use of mezcal in cocktails, new and discerning consumers have become attracted to mezcal.

WHAT IS MEZCAL?

  • Mezcal is any spirit produced from the agave desert plant, which has close to 200 types. By this definition, tequila is also a type of mezcal.
  • However, while tequila is made from only one varietal of agave — the Blue Weber, mezcals can be made from about 30 agave varietals, particularly agave Espadin (90%). Other types of agaves used for mezcals include Tepeztate, Tobala, and Arruqueño agaves.
  • Mezcal has a smoky flavor, which results from its production process — it is deeply roasted in pits known as palenques.

CULTIVATION

  • Agaves, which are very hardy plants, are cultivated in dry climates, with mediocre soils that don't need irrigation. They have natural defenses that deter large predators and are sometimes mistaken for a type of cactus.
  • Agaves grow from onion-sized plants cut off from the mother agave plants at about one year old, with 30-50cm of leaf still attached.
  • They grow into maturity in about 7-10 years (when they are harvested), and have a long life-span of between 25 and 30 years. When they are ripe, they have sharply pointed leaves that can reach a height of over two meters.
  • The plant flowers once in its lifetime, after which it dies.
  • After harvest, the sharply pointed leaves or spines are cut off, leaving the heart called the piña, which translates to pineapple, as it resembles the pineapple fruit. The piña can weigh up to 200 pounds (100 kg).

HOW MEZCAL IS PRODUCED

  • The production process for mezcal begins by cutting the harvested agave piñas into halves or quarters and placing them in a pit with red-hot river stones, "which are then covered up with agave leaves and fiber and straw mats, piled up with earth, and left to roast for four days." Roasting the agave piña brings out its very sweet natural sugars.
  • Next, the roasted agaves are removed from the palenques (the roasting pit), and using a stone wheel being pulled by either a mule or horse, the roasted agaves are crushed at a special grinding mill.
  • With a pitchfork, a person is required to move the agaves in the mill to ensure that they are grounded up consistently while the animal pulls the roller.
  • After crushing, the agaves are placed in wooden barrels to ferment.
  • First, they add hot water to the barrels and leave them for a few days. Next, they fill the barrel up to brim with cold water and allow the agaves to ferment for several days. The length of time allowed for fermentation depends on the weather; the fermentation process takes less time in hot weather.
  • The mash is then distilled twice. Low-grade alcohol is produced during the first distillation, after which the fibers are removed from the still, then the resulting alcohol is distilled a second time.
  • The mezcal is then blended to derive a consistent grade of alcohol and is either bottled immediately or left in oak barrels to age.
  • Based on the time allowed for aging, mezcal is sold in various formats, including:
  • Mezcal Blanco or Joven (aged for zero — two months)
  • Mezcal Reposado (aged for two months — one year) (Sometimes, a larva (Chinicuil), found inside the agave plant, is added to the mezcal reposado at the time it is bottled.)
  • Mezcal Anejo (onethree years)
  • Extra Anejo (older than three years)
  • In addition to these, there are also cremas de mezcal, which is sweetened and come in different flavors, including coffee, coconut, and passionfruit.
  • Legally sold mezcal, which also has the NOM stamp of authenticity, is produced in any of the nine legally recognized states in Mexican. These states include "Oaxaca, Guerrero, Michoacán, Puebla, Durango, San Luís Potosí, Zacatecas, Guanajuato, and Tamaulipas."
  • Oaxaca is, however, the epicenter of mezcal production, responsible for over 90% of the world's mezcal supply.

WHAT MEZCAL IS MOST USED FOR AND HOW

  • While mezcal was traditionally sipped straight in Oaxaca, it has grown popular as a great substitute for tequila in cocktails like Palomas and Margaritas. Due to its rising popularity and availability, enthusiasts now feature mezcal in drinks such as Old Fashioned, Daiquiris, and others.
  • "Mixto" mezcals are also available, but they must be at least 80% agave.
  • Bars offer mezcal flights along with different mezcal cocktails. For example, a bar mixes "Del Maguey Single Village Vida mezcal, Lustau Dry Amontillado Los Arcos Solera Reserva Sherry, falernum and ginger syrups, and lime juice."
  • According to Michael Gardner, Del Maguey's global business leader, mezcal "is highly popular among key influencers and discovery seekers, and within the cocktail space, it's particularly vibrant."

THE STATE OF THE GLOBAL MEZCAL INDUSTRY

PREMIUMIZATION TREND
  • Premiumization, which has become common over the past five years, is one of the key emerging trends in the global mezcal market. The trend has been vital in driving the overall performance of the mezcal market in various regions.
  • In Western European countries like the UK, Belgium, Germany, Spain, and France, there has been an immense growth in the demand for premium mezcal products.
CONSUMER DEMAND FOR VARIETY
  • Leaning on tequila's success, the demand for mezcal grew from fewer than 50,000 cases to about 360,000 cases between 2009 and 2017. This growth is driven by consumer demand for variety, as tequila consumers, especially millennials, are keen on trying out something new and exciting.
MIXOLOGY
  • The use of mezcal in cocktails is driving growth in the industry by exposing consumers to its complex flavor profile.
  • Bartenders and producers consider the mezcal's mixology potential as essential for consumer education.
  • Due to the widespread popularity of the use of mezcal in cocktails, new and discerning consumers have become attracted to mezcal. In addition, this popularity is also helping to reset mezcal's image for those with negative past experiences.
  • A significant part of mezcal's consumer base includes those who enjoy other spirits such as tequila and Scotch that have sophisticated flavor profiles.
INTEREST IN ARTISANAL MEZCALS
  • Artisanal mezcals are also driving growth because of their rich history, which consumers find who would prefer spirits with an authentic provenance find appealing.
  • Factors like "Single Village" (referring to mezcals produced using agave from one area, with ambient features) and the use of wild agave places mezcals in line with the artisan spirit movement, about which mixologists and spirits nerds are getting increasingly excited.
  • As a result, as more multinational companies are venturing into the market, they need to remain committed to authentic methods of production and quality as they scale.
ON-PREMISE IS DRIVING GROWTH
  • While off-premise consumption of mezcal is growing, especially in metropolitan areas, on-premise consumption in restaurants and bars is a primary driver for mezcal. For example, the mezcal brand, Del Maguey, which does equally well with men and women, sells 80% of its product in restaurants and bars.

RESEARCH STRATEGY

To provide details about the state of the global mezcal industry, including the trends driving the industry and the growth of the industry in the last few years, we compiled corroborated findings from different articles, which also included comments from experts in the industry.
Part
02
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Part
02

Wild Agave Mezcal Industry

Despite a negative outlook towards the future of wild agave, several players in the industry have initiated sustainable programs to safeguard wild agave varieties against depletion. Notably, some companies have established massive farms to cultivate wild agave, while others are supporting the local communities by educating them on sustainable practices.

WILD AGAVE INDUSTRY OVERVIEW

TYPES OF AGAVE GROWN IN THE WILD

WILD AGAVE THAT IS CULTIVATED

SUSTAINABILITY OF WILD AGAVE VARIETIES

  • Examples of future sustainability initiatives include Mezcales de Leyenda's initiative to pay workers above-market rates to maintain reasonable prices and special releases about causes like farming wild agave species.
  • Mezcales de Leyenda also uses innovative and sustainably sourced bottling made from recycled glass and paper labels, and natural corks." Another company, Montelobos, is recycling waste to create compost, while its parent company — Casa Lumbre, is investing in infrastructure and maintaining fair prices for agave farmers.
  • RESEARCH METHODOLOGY

    In finding information covering the current landscape for the wild agave mezcal industry, your research team explored many mezcal related reports on sustainability, wild agave cultivated agave, and the industry as a whole. In this regard, the uncovering of the information followed extensive searches through reports published by business news vendors like Forbes, digital media companies like Matador network, wines and spirits suppliers like UK-based Enotria&Coe, popular online magazines like Punch Drink, and non-profit organizations like Fundación Agaves Silvestres, which is directly involved in reforestation of wild agave in Mexico.

    Bits of information from the different reports explored helped develop a detailed overview of the current landscape for the wild agave mezcal industry, focusing on the types of agave grown in the wild and which have been cultivated, and the projected sustainability of the wild varieties. However, while one report is from 2016, it contains comprehensive data on the sustainability of wild agave, including examples of sustainable initiatives undertaken by key players in the industry. Its findings were reiterated across more recent reports, hence its inclusion as a vital source of critical information.
Part
03
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Part
03

Wild Agave Mezcal Industry: Top Players

Three of the top companies in the wild agave mezcal industry include Pernod Ricard, William Grant & Sons, and El Silencio Holdings.

Pernod Ricard

William Grant and Son

  • William Grant & Sons is a family-owned Scottish company that specializes in producing scotch and other spirits.
  • They are also a key distributor of mezcals in the US, distributing both organically-grown and wild mezcals in the US.
  • The company's wild agave variety is the Tobala and it is also its only and most popular wild agave mezcal.
  • The company's revenue in 2018 is £1.3 billion.

El Silencio Holdings

  • El Silencio Holdings is an artisanal brand that produces mezcals. The company's headquarter is in Santa Monica, California, and its mezcals are produced in Oaxaca, Mexico.
  • The company produces mezcals from both organic and wild agave varieties.
  • El Silencio's wild agave varieties are Tobasiche and Mexicano and both are equally popular as its mezcal is a mixture of both wild agave varieties.
  • The company's estimated revenue is about $2.5 million.

Research Strategy

In order to identify three of the top players in the wild agave mezcal industry, we analyzed five independent market research reports (this, this, this, this, and this) on the mezcal industry that identified key players in the industry. From those reports, we then selected those that use wild agave varieties in producing mezcals and that appeared in all five different market reports.


Part
04
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Part
04

Wild Agave Mezcal Industry: Sold Companies

Casa Montelobos, Del Maguey, Pierde Almas, and Sombra Mezcal are four examples of wild agave mezcal companies that have been sold in the last five years.

CASA MONTELOBOS

  • Casa Montelobos, the producer of Mexican mezcal brand, Montelobos mezcal, has been acquired by Campari Group, an Italian company.
  • The deal is expected to be completed at the end of 2019 and it includes the brand's intellectual property and associated inventories.
  • Campari Group will leverage a completely integrated supply chain for the brand via leased manufacturing and bottling facilities.
  • Campari Group purchased a 51% share in Montelobos mezcal and Ancho Reyes, a spicy liqueur brand, for $35.7 million.

DEL MAGUEY

  • Pernod Ricard acquired a majority stake in Del Maguey, a craft mezcal producer, for an undisclosed amount in 2017.
  • The management team of Del Maguey, including founder Ron Cooper and other executives like Michael Gardner and Steve Olson, were retained, together with existing operations.
  • According to Ron Cooper, "We partnered with Pernod Ricard because they understand and appreciate our mission of preserving the culture of the Zapotec people and protecting the traditional process of making mezcal".
  • Pernod Ricard planned to widen the distribution network of the brand after the purchase.
  • The investment was made by New Brand Ventures, Pernod Ricard's division in the US.

PIERDE ALMAS

  • Diageo acquired Pierde Almas, a super-premium mezcal brand, in 2018 for an undisclosed amount.
  • The terms of the deal were also not disclosed.
  • Diageo retained Pierde Almas' founder, Jonathan Barbieri, as brand ambassador and master distiller.
  • Barbieri said, "I am looking forward to working with Diageo to take Pierde Almas to its next stage of development. Diageo shares our commitment to the values behind every bottle of artisan mezcal".

SOMBRA MEZCAL

RESEARCH STRATEGY

To find the sale prices of the purchased companies, we explored industry sources like The Spirits Business, The Drinks Business, and Beverage Daily for news articles on the deals. We only found the sale price for Casa Montelobos, which was purchased together with Ancho Reyes, another brand.

We then scoured through the websites of the sold companies to find information on the sale prices. We also conducted an exhaustive search through the websites of the purchasing companies. While other details of the deals were discussed, the sale prices were not disclosed.

Searching through news release sites like Business Wire and PR Newswire did not also yield the sale prices for the purchased companies.
Part
05
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Part
05

Wild Agave Mezcal Industry: Global Popularity

According to IWSR Drinks Market Analysis, the tequila market, including mezcal, is expected to have the largest growth in the United States, Australia, China, the UK, and Russia. Based on data availability, we provided insights for the United States, China, and the UK below. Much of the reporting found combines reporting on tequila and mezcal. This is likely because tequila is technically a type of mezcal (a spirit produced from agave), although the method of production varies from traditional mezcal.

UNITED STATES

  • In 2018, North America held the largest market share of mezcal revenues.
  • Consumption of all agave-based spirits grew 9% in the U.S. in 2018. Mezcal consumption grew by 32.4% in the same period.
  • In 2016, the U.S. was responsible for 63% of mezcal exports from Mexico.
  • Agave-based spirits could soon overtake rum in popularity in the U.S.
  • Many consumers are beginning to prefer mezcal to tequila because mezcal comes in a variety of flavors. The growth in the U.S. market is also being driven by the rise in cocktail culture and the desire for boutique beverages.
  • In early 2018, the total cases of mezcal sold in the U.S. was about 400,000. However, this has quadrupled from five years earlier.

CHINA

  • Sales of tequila and mezcal in China are expected to increase from $38.5 million in 2018 to $55.9 million in 2022. As Statista data can occasionally be paywalled, a screenshot of the source is included in the attached Google document.
  • Clear Strategy, business consultants that focus on growth, have an office in Shanghai, and count Bacardi among their clients, believes that mezcal will be the next big thing in China. This is partially based on the fact that young people are consuming more tequila in China and more places in big cities are selling mezcal.
  • Single malts are currently leading the growth of spirit consumption in China and mezcal has many similar characteristics which puts in a good position to duplicate the growth of single malt.
  • Mezcal is also a craft beverage, with many nuances and flavors to explore. The beverage is also produced in many regions so consumers who want to learn more have many destinations they can visit.
  • Newly wealthy Chinese consumers in the 25-34 year-old age range are looking for natural and authentic beverages, and mezcal delivers.
  • China could surpass the U.S. as the number one tequila consumer by 2020.

UNITED KINGDOM

  • Think Gin was launched in 2015 as a London-based event designed to capitalize on the growing gin market in the UK. In 2019, a Think Tequila and Mezcal event was added due to the fact that both tequila and mezcal are shifting from niche spirits to more mainstream consumption.
  • Michael Gardner, global business leader for Del Maguey, a mezcal brand, reports that the UK is one of the five best markets for the brand, along with the U.S., Greece, France, and Australia.
  • It was reported in September 2017 that mezcal could now be found at many bars in London. That same month, there was the first London Mezcal Festival to celebrate the spirit. The third annual event was held in 2019.
  • A 2019 article in the UK GQ reported that there had been a large increase in the availability of mezcal in the last few years in the UK.
  • Although the majority of the report is behind a paywall, the Global Mezcal Market 2018-2022 report by Research and Markets reports that the "demand for premium mezcal products has grown immensely in Western European countries like UK, Germany, and Belgium."
  • In 2016, only the U.S. (63%) and Spain (6%) were responsible for more exports of mezcal than the UK (5%).
Part
06
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Part
06

Wild Agave Mezcal Industry: US Popularity

While quantitative insights on the regions in the US where mezcal is growing in popularity is unavailable, mezcal popularity is greater in metropolitan areas in the US.

Helpful Findings

  • New Orleans, Louisiana in the southeastern region of the US is one of the places where mezcal is growing in popularity. This is evidenced by the fact that a mezcal competition was held in New Orleans during the agave week in the city.
  • On-premise sales in bar and restaurant account for as much as 80% of all sales of mezcal in the US for major mezcal brands such as Del Maguey, which was acquired by Pernod Ricard in 2017.
  • Metropolitan areas are the regions in the US driving the sales and growth of mezcal mainly because they were first introduced to those areas and because it is an ultra-premium spirit.
  • Some states driving the growth of the spirit include New York City, Los Angeles, San Francisco, Chicago, and Miami.
  • According to Shem Blum an industry analyst, the growth of mezcal in the US is also due to "fairly rapid expansion into mid- and small-scale cities.
  • Consumption of mezcal in the US grew by 32.4% in 2018, which was the biggest gain across all spirits categories.
  • Mezcal vendors primarily target millennial consumers because they are "more enthusiastic to try new flavors and variants as compared to the older demographic."

Research Strategy

To find regions in the US where mezcal is growing in popularity as evidenced by quantitative data/insights, we started by searching press releases, industry reports, media, as well as statistics databases for data on regions in the US where mezcal is most popular given that these sources are most likely to have the data. We tried to find data on regions in the US with the most sale of mezcal. However, we were unable to find such data. We only found articles about the growing popularity of mezcal in the US in general. For instance, we found data showing that the consumption of mezcal in the US grew by over 32% in 2018 but growth by region wasn't available.

Next, we tried to find data related to the growth of mezcal spirit in the US by state. Our aim was to find any state-level data or any data showing growth of mezcal in a certain state in the US and then make inference about the growth of mezcal in the region in the US the state is in. We searched similar sources mentioned above for the data. However, although we found some state-level data about the growth in popularity of mezcal which we have reported above, we were unable to find quantitative data/insight. We also found data on the consumption of tequila by state in the US. Given that tequila is an agave plant rink just as mezcal, it could be helpful in predicting the likely growing popularity of mezcal by state/region.

We also tried to find regions/places/cities in the US where any mezcal-related event has held as a way to understand regions where mezcal is popular in the US given that such events are likely to be held in cities/places where the mezcal market is growing. Again, we searched similar sources reported above as well as events databases such as Agave Week, Trade Fest, All Spirits Events, among others. While we found data showing that a mezcal competition was held in New Orleans, we didn't find any quantitative insights such as mezcal consumption volume or market share in the city or region in general. Giving the unavailability of quantitative data, we have compiled related findings we came across above, especially those showing the growing popularity of mezcal in a US city, state, or region.
Part
07
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Part
07

Popular Mexican Chefs in the US

In terms of social media followers, Aaron Sanchez, Enrique Olvera, Carlos Gaytan, Diego Hernandez, Santiago Gomez, Bricia Lopez, and Ray Garcia are some popular Mexican chefs working in the US. Detailed below is more information about how these chefs became popular, their social media reach, and their US-located restaurant reviews and visits, if still open.

AARON SANCHEZ

ENRIQUE OLVERA

CARLOS GAYTAN

  • Carlos Gaytan has 126,036 followers on Instagram, 12,670 on Twitter, and 30,939 on Facebook.
  • Carlos Gaytan is the first-ever Mexican chef to receive a Michelin star. He was born in Mexico, in a town called Huitzuco, with a population of 16,000. His family sold food to make ends meet, and people would come from miles away to try their crispy chicken tacos. However, it was not enough to keep Carlos' family afloat. At age 20, he moved to Chicago and started working as a dishwasher. He started coming early, so the chefs would teach him their craft. Later, he learned French cuisine from the Union League Club of Chicago. This was where Carlos prepared a 600-person dinner for the embassy of France. The dinner was a success that the well-known restaurant asked him to work for them as their executive chef. With a few thousand dollars in savings and some donated kitchen equipment, Carlos opened his first restaurant, Mexique.
  • After a decade-long of serving customers, earning Michelin stars in 2013 and 2014, Carlos closed Mexique last year. In September this year, he announced the opening of one of his three concept Mexican restaurants under one roof: Tzuco, a 110-seater upscale restaurant; Panango, a fast-casual panaderia; and Tales of Carlos Gaytan, a 16-seat chef tasting room.

DIEGO HERNANDEZ

SANTIAGO GOMEZ

BRICIA LOPEZ

RAY GARCIA

RESEARCH STRATEGY

To determine some of the most popular Mexican chefs working in the US, we started our research by looking for pre-compiled lists from credible websites in the food and restaurant space. We found several lists; however, these lists do not include any metrics on how they picked the chefs included in the lists. We collated all the lists created within the last two years and used the combined list as a starting point. From here, we looked into each of their profiles on the three major social media platforms: Instagram, Twitter, and Facebook. To make sure that we are looking at the right person, we also matched other information, such as the profile picture, bio, restaurant's name, and address. For chefs who have more than 10,000 followers on Instagram and Twitter, since these social media platforms round up the follower count to the nearest hundred, we used a tool to uncover the exact follower count. For a few of the chefs, we could not locate their Facebook accounts nor their restaurant's Facebook account, so we put N/A in the corresponding rows of the spreadsheet we made to tally the follower count. Next, we added their followers across all three social media platforms and ranked them according to the most number of followers as presented in our findings above.
Part
08
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Part
08

Non-musical Mexican Artists

Seven popular non-musical Mexican artists working in the US include Salma Hayek Pinault, Jaime Camil, Ana de la Reguera, Lora Arellano, Michael Peña, Enrique Olvera, and Carlos Gaytan.

POPULAR NON-MUSICAL MEXICAN ARTISTS WORKING IN THE US

1. SALMA HAYEK PINAULT — Actress

2. JAIME CAMIL — Actor

3. ANA DE LA REGUERA — Actress

4. LORA ARELLANO — Makeup Artist

5. MICHAEL PENA — Actor

6. ENRIQUE OLVERA — Chef

7. CARLOS GAYTAN — Chef


RESEARCH STRATEGY

We found a list of top Hispanic actors and actresses from IMDb and carried out further research to establish their ethnicity and current country of residence. We also searched for popular artists in other fields and found some information for a famous makeup artist and popular chefs in the US. For each person, we first found articles that categorized them as popular before we included them. However, since popularity differs across different industries, we used artists with over 100,000 followers as the metric for popularity. More specifically, we used the followers on Instagram since all the individuals posted there in 2019, compared to Twitter, where some of them posted last in 2017 and 2018. For the individuals selected, we chose people that are Mexican-born or of Mexican descent.

We made use of some sources that are older than Wonder's standard two-year timeline for sources. However, these sources were used to provide information on the ethnicity of some individuals. Since such information is not subject to dates and time, we used them to provide the same.


Part
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Part
09

Wild Agave Mezcal Industry: Drivers

Three trends driving the growth of the U.S. mezcal industry include premiumization, experiential spirit consumption, and increased desire for handcrafted/artisanal drinks among Millennials. Further details of each trend and how it affects the mezcal industry, including any aspects relating to wild agave mezcal, are detailed below.

PREMIUMIZATION

  • For the past nine consecutive years, the trend of premiumization, defined as the shift in consumer interest towards more premium and luxury brands, has driven the growth of high-end spirits such as mezcal among U.S. consumers.
  • Brands within the spirit sector, including wild agave mezcal, benefit from increased consumer demand among Millennials, who prefer innovative and high-end products.
  • From 2009 to 2017, mezcal sales in the U.S. increased seven-fold, growing from 50,000 cases to 350,000 cases sold.
  • Premium brands have grown in part to changing lifestyles, growth of disposable incomes, and distinct consumer preferences for authenticity in their products.
  • Wild agave varietals such as tobala and tepeztate are considered top-tier and luxurious, compared to the mass-produced espadin mezcal, making them more appealing to young consumers.
  • Montelobos Mezcal, which originally produced its products using more budget-friendly espadin agave, launched Montelobos Tobala in 2018 to provide a rarer, wild agave varietal that is innovative and more high-end than the brand's other products.

EXPERIENTIAL SPIRIT CONSUMPTION

  • The rise in cocktail culture among Millennials has led to a consumer preference for drinks that are meant to be a full experience.
  • Mezcal is particularly appealing as a spirit in cocktails due to its distinct, smoky flavor and diverse flavor profiles from the various regions in which it is produced.
  • It is a popular spirit choice for use in cocktails due to the powerful flavor it provides in small amounts.
  • Given the more adventurous palates trending among youths, Millennials especially, this has led to a rise in popularity for all types of mezcal, including wild agave varieties.
  • However, the exoticism of mezcal — particularly premium types favored by Millennials for their unique taste that is meant to be savored and take at least seven years to cultivate — has led to a boom in popularity of wild agave mezcals that cannot be met by producers due to the endangering species of wild agave.
  • While wild agave mezcal poses issues of sustainability, its exotic and exclusive nature is part of the appeal among younger consumers.
  • Rare, wild varietals of mezcal are offered for tastings, with a hefty price tag (between $125-$200), to appeal to the sensory experience enjoyed by Millennials and spirits connoisseurs.
  • The Vino de Mezcal series for popular mezcal brand, Del Maguey, features wild agave expressions that have enriched background stories and are advertised as "supplements" to mainly espadin mezcal for those with superior knowledge of mezcal.

INCREASE IN HANDCRAFTED MEZCAL

  • Within the last five years, there has been an increase in U.S. consumer interest in purchasing handcrafted mezcal, surpassing the demand of any other type of mezcal.
  • Handcrafted or artisanal mezcal is made using both traditional and unique methods at smaller, typically family-owned, distilleries.
  • Several popular mezcal brands are considered artisanal, which limits their ability for mass-production, therefore driving up prices of products to offset costs of producing the mezcal.
  • An increasing consumer preference for extra añejo, or 100% agave, mezcal is gaining momentum in the U.S. mezcal market due to the spike in consumer preference towards this style of mezcal.
  • This type of mezcal takes much longer to cultivate than joven mezcal, which further strains the ability to mass-produce such a mezcal.
  • The handcrafted production of mezcal is a key selling point to consumers and is a critical aspect of the product that cannot be lost in attempts to expand the volume of the market.
  • Mezcal brands that promote artisanal production tend to be preferred, both by trade and by consumers.
  • Ilegal Mezcal, an artisanal mezcal brand known for guerrilla marketing tactics and widely promoting its 100% handcrafted espadin agave mezcal, received a significant investment from Bacardi, the largest independent spirit producer in the world, in 2017.
  • Known as the one of the leading artisanal mezcals in the U.S., Ilegal Mezcal will likely dominate mezcal sales in the U.S. with this new partnership that enables national distribution of Ilegal's mezcal products.
  • The handcrafted ethos of Ilegal Mezcal is likely the driving force behind the deal, considering that the leading mezcal brands driving the U.S. market are those that have a "rich history," which appeals to consumers who are more engaged in brand authenticity.

RESEARCH STRATEGY

The research team searched for recent and relevant market research reports and news articles among industry sites (e.g., Beverage Industry, Spirits Business, Beverage Dynamics) pertaining to the growth of the wild agave mezcal market to gather expertly-identified trends driving the market. However, this search strategy did not provide any relevant lists of trends specifically for mezcal produced using wild agave so the research team adjusted to search industry sites (e.g., Beverage Industry, Spirits Business) to identify any trends for specific types of mezcal that are typically categorized as wild, including tepeztate, tobala, and jabali. However, this search strategy did not yield trends specific to only wild agave products.

Next, the research team looked for wild agave manufacturers in the U.S. to identify any mentions of trends driving sales or market share growth among those manufacturers. After a thorough search, and according to the most recent market research reports, we determined that Pernod Ricard, Ilegal Mezcal, and William Grant & Sons are the considered key players of wild agave brands in the U.S. We searched the official websites of these brands and news articles pertaining to the brands with hopes of finding any mentions of trends driving the growth of their wild agave products. However, we were unable to find any useful information in that regard, as most key players encourage use of sustainable and limited agave production and mainly use espadin agave for easier consumption.
Lastly, we directed our research towards trends driving growth of mezcal in general, with hopes of finding any mentions of wild agave products in particular. To do so, we utilized credible media sources, articles by experts, and forums dedicated to the spirits industry such as Market Watch and Business Wire. Most sources provided the trends affecting mezcal overall, rather than denoting cultivated versus wild agave products. We did not obtain trends specific to wild agave with this strategy. The research team identified market research reports and articles on trends within the mezcal market more generally, although there are insights for the wild agave varietals within each trend, which are summarized in the above section. Given concerns regarding the sustainability practices of mass-producing wild agave varietals, many of the key players in the U.S. mezcal market encourage use of sustainable production using espadin agave or other agave plants that are traditionally cultivated. This makes up 90% of the mezcal market production, while wild agave production is considered more of a rarity. Trends selected and summarized were those that met the following criteria: (1) affected the growth of the market within the last five years, (2) were mentioned across more than one source cited, and (3) produced an observable increase in the number of products.

Part
10
of eleven
Part
10

Wild Agave Mezcal Industry and Alcohol Companies

Some examples of alcohol companies that have acquired wild agave mezcal producers include the acquisition of Pierde Almas by Diageo, the acquisition of Ilegal Mezcal by Bacardi, and Pernod Ricard's acquisition of Del Maguey.

DIAGEO ACQUISITION OF PIERDE ALMAS

  • Diageo, a global spirits giant, acquired Pierde Almas, a super-premium Mexican mezcal brand in May 2018. Pierde Almas is made from naturally-fermented agave and puts a great emphasis on social, cultural, and environmental awareness.
  • The main reason for the acquisition was to help Diageo develop the mezcal category in Mexico and cement its mezcal offerings in Mexico and globally.
  • Diageo was capitalizing on the recent trend in Mexico and globally, where the consumer appreciation for mezcal was proliferating, and there were promising prospects for further growth and demand for mezcal.
  • The acquisition was also aimed at expanding Diageo's mezcal offerings as the company had already started producing mezcal with its recent $1 billion acquired-company, Casamigos Tequila.
  • According to Eric Seiersen, Diageo Mexico's CEO, the acquisition gives Diageo an opportunity to "support the sustainable growth of mezcal and the communities in Oaxaca" from where it is sourced.
  • None of the companies disclosed the terms of the acquisition, so information on the value of the acquisition or the financial metric that was considered for the deal is not available.
  • Diageo's annual report for the fiscal year ending June 2019 contains a list of companies the company acquired, with the value of the acquisition, but the company confirms that it has acquired several smaller alcohol brands, of which we presume Pierde Almas is among.
  • As per Pierde Almas's founder, Jonathan Barbieri, who was retained as Diageo's brand ambassador and master distiller, the acquisition was to facilitate Pierde Almas into its next stage of development and the company came on board because Diageo shared their "commitment to the values behind every bottle of artisan mezcal."

BARCADI ACQUIRES A MINORITY STAKE IN ILEGAL MEZCAL AND BECOMES A LEADING CASA AGP MEZCAL DISTRIBUTOR

PERNOD RICARD ACQUIRES A MAJORITY STAKE IN DEL MAGUEY SINGLE VILLAGE MEZCA

  • In June 2017, Pernod Ricard expanded its offerings to include mezcal by acquiring a major stake in Del Maguey Single Village Mezcal.
  • The value of the acquisition was not disclosed, and neither was the financial metric that was considered during the acquisition.
  • The Del Maguey brand has a range of products made from premium hand-crafted agave mezcals from Oaxaca, Mexico.
  • According to Cooper, Del Maguey's founder, they partnered with Pernod Ricard because the company "understands and appreciates their mission of preserving the culture of the Zapotec people and protecting the traditional process of making mezcal."
  • The partnership would enable Del Maguey to continue distributing its products to mezcal lovers globally and ensuring that the families they work with continue to make the liquid art for generations.
  • Pernod Ricard made the acquisition because its part of the company's commitment to partner with entrepreneurs who share the company's passion for original super-premium products. The acquisition was also to help Pernod to expand their portfolio of genuine and authentic products.
  • According to Alexandre Ricard, chairman and CEO of Pernod Ricard, they were awed by Del Maguey's insane success in the market and the superior quality of their mezcals.
  • According to Jeff Agdern, senior vice president of Pernod Ricard USA’s New Brand Ventures Division, another reason why the acquisition was a success was that Pernod Ricard deeply appreciates the link between mezcal and the economy of the villages where it is produced.
Part
11
of eleven
Part
11

Online Alcohol Sales

Alcohol can be sold online through various channels such as online specialty retailers ($975 million), direct-to-consumer online sales ($410 million), on-demand online alcohol delivery services ($103 million), and online grocery stores ($87 million). There are various federal, state and local regulations that companies need to follow to sell alcohol online or through a physical store. However, laws and regulations vary for each state. Generally, only 11 states have a mandatory law on unit pricing provisions while the rest of the states do not have restrictions, which allows for price negotiations.

OVERVIEW

  • In 2017, the online alcohol sales in the US reached $1.7 billion.
  • The biggest online sale channels are online specialty retailers ($975 million in sales), direct-to-consumer online sales ($410 million), on-demand online alcohol delivery services ($103 million), and online grocery stores ($87 million).
  • While online grocery stores sales account for about 5% of the total online alcohol sales, it is predicted that "the channel's relative irrelevance will not last long" and in the near future "it will develop into the biggest driver of online alcohol sales."
  • While specialty retailers have the biggest share of the online alcohol shares, they have recently seen a challenge, "as FedEx, UPS, and other carriers have announced that they will no longer accept interstate shipments of wine, responding to pressure from states that have been increasingly seeking to enforce bans on shipments from out-of-state retailers."

LAWS TO FOLLOW

State differences:

  • Each state has specific laws pertaining to selling and buying alcohol from physical or online stores, including shipping restrictions. For example, some states prohibit alcohol sales at certain times of day, while other states prohibit grocery stores from selling certain types of alcohol entirely.
1. Out of the 54 states, territories and commonwealths, three states—Alabama, Oklahoma and Utah—specifically prohibit the direct shipment of alcoholic beverages to consumers.
2. Mississippi, Guam, Puerto Rico and the U.S. Virgin Islands do not have statutes that specify that direct shipments are allowed.
3. Massachusetts and Pennsylvania have had statutes ruled unconstitutional by state courts in those states.
4. Delaware has statutory provisions that require orders to be processed and shipped through licensed wholesalers.
5. Arizona, Arkansas, Georgia, Kentucky and South Carolina have statutory provisions that allow wine to be shipped into the state when purchased by the customer on-site at the winery.
6. Rhode Island allows intoxicating beverages to be shipped when purchased on-site.
7. The five states —Arizona, Florida, Hawaii, Nebraska, and New Hampshire — and the District of Columbia authorize the direct shipment of all spirits as specified.
8. Eight states (Delaware, Massachusetts, Montana, North Dakota, Ohio, Oregon, Vermont, and Virginia) allow the direct shipment of beer and wine
9. The remaining states only allow direct wine shipments.
  • The different state laws, legislation, and regulations on alcohol selling can be found in this directory.

Age restrictions:

  • Whether a customer is buying alcohol through an online or a retail store, normal age restrictions apply. To purchase alcohol, one must be at least twenty-one (21) years of age.

Shipping Alcohol:

  • For example, one "cannot mail" alcohol. Federal law prohibits the United States Postal Service from carrying all spirituous, vinous, malted, fermented, or other intoxicating liquors of any kind."
  • In fact, the Postal Service will check if it suspects a package contains alcohol, and will confiscate it as well.
  • While private carriers such as FedEx and UPS can ship and deliver alcohol, there are regulations that need to be followed. These carriers are required to report alcohol-shipping information in compliance with state law.

Alcohol price points:

  • States that needs to follow unit pricing provisions are Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Oregon, Puerto Rico, Rhode Island, Vermont, and the Virgin Islands.
  • Upon visiting the latest curated laws on unit pricing (including alcohol) for each state, there were "no specific wording" that stated that it does not allow negotiations of individual prices.
  • Except for the 11 states with mandatory unit pricing, the rest of the states have no specific restrictions on pricing, which allows for pricing negotiations to be carried out.


Sources
Sources

From Part 03
From Part 05
From Part 07
From Part 08
From Part 09
From Part 10
Quotes
  • "Pierde Almas is produced in Oaxaca, Mexico from 100% naturally fermented agave. The brand is known for having a strong focus on social, cultural and environment awareness."
  • "Pierde Almas will be the second mezcal brand to join Diageo’s portfolio, following the company’s launch of a mezcal under its recently acquired Casamigos Tequila brand. Terms of the deal have not been disclosed."
Quotes
  • "In addition, Diageo has made a number of smaller acquisitions of brands, distribution rights and equity interests in various drinks businesses."
Quotes
  • "Ilegal Mezcal received an undisclosed investment from Bermuda-based Bacardi – the world’s largest independent spirits producer – but will continue to operate independently under its founder, John Rexer, maintaining its own business structure and current employees."
Quotes
  • "It was revealed in June this year that Pernod Ricard had moved into mezcal with the purchase of a majority stake in the brand"
Quotes
  • "The value of the deal, made through Pernod Ricard USA’s New Brand Ventures division, has not been disclosed, and is expected to close within 90 days."
  • "Del Maguey was established in 1995 by Cooper, an artist and entrepreneur, and comprises a range of super-premium, hand-crafted mezcals from Oaxaca."
  • "“Through this partnership, our management team will gain increased opportunities to distribute our products to mezcal lovers around the world while also ensuring that the palenqueros – or families we work with – are able to continue crafting their liquid art for generations to come.”"
From Part 11
Quotes
  • "Online alcohol sales in the US hit US$1.7 billion dollars last year, according to a new report from Rabobank, which urges brands to “aggressively pursue strategies” for e-commerce growth."
  • "Rabobank’s research shows that sales from on-demand alcohol delivery services reached US$103m in 2017; online grocery reached US$87m; direct-to-consumer online sales reached US$410m; and online speciality retailers reached US$975m."
Quotes
  • "Online grocery offers huge potential for the alcohol category as the virtual channel accounts for just 5% of all online alcohol sales (US$1.7bn) currently but will soon explode, according to Rabobank."
  • "The penetration of online grocery is 13 years behind the rest of retail,”​ Rabobank analyst Bourcard Nesin said."
  • "The channel’s relative irrelevance will not last long. We firmly believe that it will develop into the most important driver of online alcohol sales."
Quotes
  • "Moving into 2018, these retailers are now facing a challenge, as FedEx, UPS, and other carriers have announced that they will no longer accept interstate shipments of wine, responding to pressure from states that have been increasingly seeking to enforce bans on shipments from out-of-state retailers."
Quotes
  • "Federal and state laws regulate the manufacture and sale of alcohol in brick and mortar stores, and these restrictions extend to the Internet. "
  • "Different states have different laws when it comes to purchasing alcohol. Since the end of prohibition in the 1930s, states have taken the lead in regulating the manufacture and sale of beer, wine, and spirits."
  • "The normal age restrictions for buying alcohol apply online as well. Online customers must be at least twenty-one years of age to legally purchase beer, wine, and spirits. Breweries, wineries, and distilleries that sell online must still be licensed by state agencies and obey state laws; they will take steps to verify the age of their online customers. "
Quotes
  • "The majority of states have statutory provisions that allow for out-of-state manufacturers to ship alcoholic beverages directly to consumers. The majority of states restrict the direct shipments to wine."
  • ""
Quotes
  • "In the United States, each state has the authority to regulate the production, sale, and distribution of alcohol within its borders. This means state and local jurisdictions may have their own requirements in addition to federal requirements. State laws and regulations vary widely from state to state, and may be more restrictive than federal regulations."
  • "You must meet all state and local requirements in any state where you plan to do business (unless Federal law preempts the state law). If you plan to do business in a state, you must contact its appropriate authorities for more information about the state and local requirements."
Quotes
  • "Currently, nineteen (19) states and two (2) territories have unit pricing laws or regulations in force. Eleven (11) of these have mandatory unit pricing provisions. They are: Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Oregon, Puerto Rico, Rhode Island, Vermont and the Virgin Islands. "
  • "It is important to understand the pricing laws and regulations of any state in which you do business. Laws and regulations can vary by state; from no specific requirements to requirements that include items pricing, unit pricing or varying degrees of one or both."