Mexico wants to see tequila on China's top shelf

MEXICO CITY -- With restrictions lifted, the tequila industry gears up to sate China's thirst.
Written by Lauren Villagran, Correspondent (Mexico City)

MEXICO CITY -- China has finally invited Mexico to the party and is letting it bring its finest booze, ending a de facto ban on pure agave tequila.

Tequila makers are celebrating the long-awaited opening of China's market after President Xi Jinping came here in May and, among other things, announced China would relax the restrictions that have prevented brands like Herradura, Patron, Don Julio, and José Cuervo from exporting there. The industry envisions positioning its tequila on China's top shelf: competing for a share of that country's fast-growing luxury lifestyle market.

"It's an important step for us," said Ramon Gonzalez Figueroa, who heads up the Guadalajara-based tequila industry association, the Consejo Regulador de Tequila. "In 10 years, [China] could become our No. 2 export destination."

Currently, 79 percent of Mexican tequila heads north to the United States, the world's top consumer.

As China gets wealthier, people are buying more liquor. Spirits sales volume rose 5 percent in 2011 to reach 4.4 billion liters in 2011, according to Euromonitor, a market research provider. And the trend towards pricier, higher quality products -- "premiumization" -- is happening across all categories, from traditional Chinese baijiu to Scotch whiskey.

Tequilas Herradura, owned by Kentucky-based Brown-Forman, sees "potential for super-premium brand growth" in China, said Ann Stickler, managing director of tequilas for the company, which also markets el Jimador.

"We're looking at the Chinese adopting new experiences," she said. "An emerging upper class is looking for new ways to consume spirits."

Herradura's Asia segment saw sales volume grow nearly 15 percent in Japan and 30 percent in Taiwan between 2011 and 2012.

Asia -- specifically Japan, Korea and Singapore -- has emerged as the fastest-growing region for the Las Vegas-based Patron Spirits Company, which saw sales there jump 25 percent last year. Greg Cohen, director of corporate communications, says Patron is "very excited" about the opening of the Chinese market.

"Patron tequila is a luxury brand," he said. "There is a huge market in China for luxury goods. We're very excited and we see great potential in China."

Neither Herradura nor Patron have announced when they will start exporting to China. The Consejo Regulador de Tequila suggests that some may wait for China to also recognize tequila's denomination of origin, which restricts authentic tequila production to specific areas of Jalisco, Michoacan, Nayarit and Tamaulipas states.

In the foreign spirits category, Euromonitor says blended Scotch whiskey and cognac lead the Chinese market. And tequila wants to compete at that high end, according to Gonzalez Figueroa. He believes the Chinese palate is primed for Mexico's emblematic 80-to-100-proof beverage: Chinese baijiu averages 110-proof and is frequently consumed straight.

There is some tequila sold in China already, what's known as mixtos -– tequilas that may only meet the 51 percent agave-based limit required to be called tequila. But China's especially tight restriction on methanol content, of which tequila has traces, prevented Mexican makers of 100 percent agave tequila from exporting. Xi's announcement removed a spine that had rankled China-Mexico relations for years.

Now Chinese consumers and Mexican tequila makers can officially toast that decision -- in Mexico City or Beijing -- with a margarita.

Photo: Flickr/Lindsay Eyink

Reporter's note: This article has been changed to correct "ethanol content" to "methanol content."

This post was originally published on Smartplanet.com

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