Updated: Sep 24
And Unrealized Selling Points That Could Increase Its Retail Value
Suggested pairing with the article; A mezcal that came in a water bottle.
After distilling our first batch at Finca 18, called MI COMPA, I saw the true costs that go into producing agave distillates. Leading to some burning questions that needed to be answered.
Mainly, how could many artisanal producers of Raicilla or Mezcal sell their spirits in Mexico for $350 per liter on the open market and why would they even do so? How is it possible that I as a consumer in Mexico could buy finished, quality artesanal spirits cheaper than it was for me to produce it?
The answers surprised me and may surprise you.
The Legality Spectrum Imbalance
Even to this day, a spectrum exists in Mexican spirits between producers being 100% legal or purely clandestine.
A more likely scenario, the hybrid method where a producer can act fully legal in some instances and in others, sell their goods basically for cash (without marbete and a factura). This is because taxes for spirits in Mexico are quite high. David Suro touches on this in his new book Agave Spirits.
Where a distiller falls on this spectrum typically dictates bottle pricing and where the bottle could be sold. The more legal the distiller is, the higher prices a beverage director, brand owner, or distributor will likely have to pay. However, being more legal gives the distiller more access to markets like; restaurants, bars, hotels, and even exportation should the distiller decide to create his own brand.
Legal considerations include; legal business registration, federal / state / local approvals, trademarks, tax stamps, tax regimen, DO certification, tax designation, legal bank account, exportation paperwork, and so on.
In terms of the US market, a sort of loophole exists where a United States registered brand can source clandestine agave spirits and import it into the United States. For the US-based brand, it is completely legal. For the Mexican artesanal producer it is not and the clandestine producer is still getting access to markets that they otherwise wouldn't have. However, this type of brand is very important because they help the artesanal producer economy and the people who likely cannot afford to get all of their paperwork in order. The above scenario is the exception to the rule in the grand scheme of things. Although it does provide the opportunity to help a producer and their family, it also exposes the producer to risk of serious penalty should they get caught.
The correct way to partner with a clandestine producer is to pay to make them fully legal. However the brand owner would need to ensure the partnership is long-term and also to commit to buying X amount of bottle per year at X price. There is a lot of expenses involved once a producer goes to that next level. In general, tequila producers fall much higher on the legal spectrum. You would be very hard pressed to buy a $350 pesos per liter tequila directly from a quality producer.
Tequila producers pay a lot of money to be certified, to export, and to be able to sell their goods in the formal local markets. And because the tequila industry is so big, it receives much more attention from the authorities thus requiring more resources to protect and manage.
Clandestine producers may not even keep any form of accounting, don’t have a formal bank account, and you can likely fill up a water bottle directly from the garrafone, or water jug if this is how the mezcalero chooses to operate. If so, their main market likely the town they live in and US brand owners.
The Agave Procure Imbalance
Another rather interesting imbalance exists with how producers procure their materia prima, raw material.
A producer paying market price for his agaves has a significant cost disadvantage than that of a producer with estate grown agaves.
As an example, the market for Blue Weber agave is robust and many producers buy from third party agave sellers to make their tequila. In some instances a tequila producer may grow agaves themselves but these agaves are usually reserved for special batch bottles (with estate grown agaves). A more artesanal producer may exclusively use estate grown agaves.
In mezcal, the opposite seems to exist. There is an agave market but the majority of agaves harvested for production are estate / producer grown. It seems like a good selling point, yet you hardly ever hear about how agaves are procured on a bottle of mezcal.
Why are estate grown agaves less expensive?
For an artisanal producer, the family likely tends the agaves themselves and the raw material is nearly free from a monetary standpoint. At that point it is just about putting a value on one’s time and how quickly the family needs to sell through the batch to generate some cash, that is why you can get $350 per liter mezcal in Mexico.
The scalability of this model tops off when a distiller starts having a degree of success and needs to hire more people, expand the distillery, and buy more agave on the open market. This is where the real costs start to get incurred and they’ll have to factor in these expenses that were once considered free.
Unrealized Selling Points That Could Help Increase The Value Of Of An Agave Spirit
Here are a few selling points in an artesanal spirit that I believe many distillers are not using to differentiate themselves. There are many out there, and here I am offering three of the bigger ones that I hope to see on bottles someday.
Agaves Grown From Seed Versus Hijuelos Versus Wild Agaves
Agaves germinated from seed take an insane amount of work to cultivate compared to agaves grown from the hijuelo. Yet in general, there is no buyer preference between an A. Angustifolia that is grown from seed or one from hijuelo. This occurs at the producer and consumer level. After growing 50,000 agaves from seed myself, I truly believe that seed grown agave should cost more.
It is not just the labor involved why I think agaves grown from seed should be priced higher. They are the closest you can get to resemble a wild agave. Wild agaves are known to have a better flavor than cultivated ones. Yet you hardly ever see the “grown from seed” selling point being listed on the bottle of mezcal or raicilla, and definitely not in tequila.
Speaking of wild agaves, spirits made from wild agaves, called silvestre, do command a higher price point on the open market. But in my point of view, this is equivalent to poaching elephants just for the ivory. Demand for spirits made from wild agaves promotes over-harvesting and depletion of regional agaves.
A classic example hit close to home. As raicilla started getting popular, wild A. Maximiliana were being over-harvested around Mascota and the Sierra Madre to the point where the region literally ran out of it.
This forced producers to start cultivating it themselves because there wasn't any agave market for this agave. A. Maximiliana can only be grown from seed and people started realizing the true cost of this error and had to change courses. You see this story time and time again in mezcal as well.
A sustainable way to combat this is to replant three agaves for every one harvested.
The lesson for me would be to be careful of purchasing distillates made from wild agave and to be sure that the producer is replanting at least three agaves for every one they harvest.
Rested in Glass
If you see maduro en vidrio on a bottle of mezcal, that means that it has been resting in glass for a period of time. All certified agave spirits are actually rested for a period of time before being bottled (usually in glass or plastic). That is because the spirits has to sit sealed while awaiting test results.
Maduro en vidrio becomes a selling point somewhere after three months of intentionally being rested.
Resting in glass happens more often than I think people realize. For some mezcaleros it is part of the tradition and process. It is so common that I think some mezcaleros don’t even consider that it would command a higher price point. But it does.
In the case of raicilla, many a raicillero rest in glass for three to six months. Yet when the spirit gets bottled, this selling point is nowhere to be found.
Unless you are using a roller mill, there is always a certain amount of handwork involved with breaking down the agave before it hits the canoa, tahona, or hebradora de agave.
After cooking, the agave needs to be cut into fist-size pieces with a machete or axe. This is because it would be impossible to mill the agave properly if you put the entire half piña directly into the tahona.
For me, this is one of the hardest and time consuming parts of the process. It is also not normally put on the label of a bottle.
Pricing in Mexico, especially in terms of mezcal and raicilla, is not always correlated to quality. It could be that legal expenses are not priced in or the manner of how the agave was procured.
A United States brand can choose to help a clandestine producer in a sustainable way.
There are many unrealized features or selling points of an agave distillates that never make it on the bottle, yet could command a higher price point.
The amount of handwork and labor involved in the process of distilling is backbreaking and is likely more labor intensive than any other spirits production in the world. I truly believe that bottle prices are way too low in comparison to what it takes to make one liter of agave spirits.
Sincerely, Greg Rutkowski
Greg is a certified Master of Agave Spirits and a distiller at Finca 18. With a Polish-Mexican background, he moved to Puerto Vallarta, Jalisco from Chicago. Today he dedicates most of his time tending his agaves and giving tours of the distillery.