Mexico's Tequila Industry Faces Glut Amid Slowing Demand and Tariff Threats

Mexico is sitting on more than half a billion litres of tequila in inventory, almost as much as its annual production, as the fast-growing industry reckons with slowing demand and the prospect of tariffs on exports to the US under Donald Trump. By the end of 2023, the industry had 525mn litres of tequila in inventory, either ageing in barrels or waiting to be bottled, according to data shared with the Financial Times by the Tequila Regulatory Council.

Of the 599mn litres of tequila produced last year, about one-sixth remained in inventory, according to the figures. “Much more new spirit is being distilled than is being sold, and inventories are starting to accumulate,” said Bernstein analyst Trevor Stirling, attributing the build-up to falling demand and new distillery capacity that has recently begun operating in Mexico. “The tequila industry is set for a very turbulent 2025.” Consumers’ thirst for Mexico’s national drink grew rapidly over the past decade as the spirit went mainstream in the US, partly thanks to celebrity-backed brands such as George Clooney’s Casamigos. But demand has fallen back over the past 18 months as the pandemic spirits boom subsided and consumers cut back on their drinking in response to higher prices. The amount of spirits sold in the US in the first seven months of the year shrank 3 per cent compared with the same period last year, according to drinks data provider IWSR. Tequila consumption fell 1.1 per cent, compared with a 4 per cent rise in 2023 and a 17 per cent rise in 2021, the height of the tequila surge. Though some of the inventory is in the process of being aged, rather than just awaiting bottling, tequila evaporates rapidly compared with other ageing spirits — partly because of Mexico’s warm climate — meaning that most tequila is not left in barrels beyond three years. To add to the industry’s woes, Trump has threatened Mexico, the US’s biggest trading partner, with a 25 per cent tariff on its good

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