North America Agave Spirits Market Size, Share & COVID-19 Impact Analysis, By Product Type (Tequila, Mezcal, and Others), By Distribution Channel (On-Trade and Off-Trade), and Regional Forecast, 2023-2030

The North America agave spirits market size was valued at USD 9.61 billion in 2022 and is projected to grow from USD 10.65 billion in 2023 to USD 18.83 billion by 2030, exhibiting a CAGR of 8.49% during the forecast period.

The North America agave spirits market witnessed the emergence of numerous craft distilleries specializing in tequila and mezcal production. The growing popularity of premium and artisanal spirits in countries such as the U.S., Canada, and Mexico have propelled the region's demand for tequila and mezcals. Furthermore, the rising trend amongst high-net-worth individuals to seek out premium products, especially in developed economies, positively impacts product demand in the region.

COVID-19 IMPACT

Supply Chain Disruptions and Decline in Off-Trade Sales to Slow Down Market Growth Amid Pandemic

The impact of COVID-19 pandemic negatively affected the North America agave spirits market growth. The pandemic initially disrupted the industry due to nationwide lockdown, restrictions on gatherings, and closure of bars, restaurants, and pubs. These measures led to declining sales of products, including tequila and mezcals, especially from offline stores. According to the American Distilling Institute (ADI) and Distilled Spirits Council of the United States (DISCUS), the pandemic hindered the growth of the on-site sales of craft spirits down by 25%. The market also faced supply chain disruptions due to labor shortages and transportation disruptions, leading to delays in the production processes and distribution of agave spirits.

LATEST TREND

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Growing Popularity of the Cocktail Culture to Aid Market Growth

The growing trend of infusing different spirits to formulate a cocktail propels tequila sales in the region. Bartenders and mixologists have been experimenting with unique ingredients, infusions, and techniques to create innovative, high-quality cocktails. Furthermore, the proliferation of cocktail festivals and competitions across North America highlights the growing interest in mixology and cocktail culture. To cater to the consumer's at-home cocktail trends, key players are introducing new product lines, including the ready-to-drink/serve category, and maximizing the product range. For instance, in February 2023, the Batch & Bottle company launched its Batch & Bottle Milagro Margarita in the U.S. market. The Batch & Bottle Milagro Margarita combines silver tequila, tangy lime juice, and sweetness. Consumers can enjoy the new product range as neat, on the rocks, and cocktails mixed with other drinks.

DRIVING FACTORS

Innovation in New and Exotic Flavors to Result in Enhanced Market Growth

The North American market growth has been increasing recently due to the growing demand for flavored and exotic agave spirits. Agave spirits, such as mezcals and tequila, have gained interest as consumers seek more diverse and unique offerings within this category. Artisan producers experiment with unique flavor combinations, raw materials, and production techniques to create distinctive agave spirits. For instance, in July 2022, Casa Lumbre, a global spirits company, launched its first flavored premium and artisanal cristalino mezcal named Contraluz. The product contains green agave, citrus, and light smoke flavors, and it also has additional notes of vanilla, cedar, honey, and dried fruit.

Surging Demand for Hand-Crafted and Premium Spirits among Consumers Fuels Market Growth

The craft movement has gained significant momentum in North America, with consumers actively supporting local and small-scale producers. Craft distillers are known for their artisanal approach, small batches, and emphasis on locally sourced ingredients, which help propel the demand for premium spirits in the region. Moreover, the premiumization trend has further extended the agave spirit industry; consumers are willing to pay extra for high-quality products. Therefore, players in the market come up with innovative launches. For instance, in March 2023, Del Maguey Inc., owned by Pernod Ricard USA, LLC, launched premium hand-crafted DEL MAGUEY VIDA Puebla mezcal. The new product is available across the U.S. and highlights the hand-crafted expressions made by the company.

RESTRAINING FACTORS

Loss in Genetic Diversity and Threat from Climate Change Affecting the Productivity of Agave Plants to Restrain Market Growth

The growing popularity of tequila and mezcal has significantly hampered the productivity of agave Americana plants that manufacture premium spirits. Tequila manufacturers use high-yielding mono-crops, which require increasing amounts of pesticides leading to a loss in genetic diversity. Furthermore, manufacturing agave-based spirits generates a lot of waste; if disposed of improperly, the vinasse (waste material) contaminates soil and water supplies, leading to ecological dead zones. For instance, for every liter of tequila produced, approximately 5 kg of pulp and 10-15 liters of vinasse, an acidic waste liquid, are left behind. In addition, changing climatic conditions leading to rising global temperatures also affect the productivity of agave plants, thus hindering market growth.

SEGMENTATION

By Product Type Analysis

Tequila Segment to Dominate the Market Owing to its Increasing Popularity among Millennials

Based on product type, the market is classified into tequila, mezcal, and others.

The tequila segment is expected to hold a significant market share. The region is witnessing substantial growth in tequila consumption due to changing consumer preferences, increased interest in premium and artisanal spirits, and the growing popularity of tequila-based cocktails. Tequila is primarily made from fermenting the Weber blue agave plant. According to the International Wine and Spirit Research (IWSR), the distilled beverage made from blue agave plants is known to be the second-fastest-growing spirit in the category in recent years. Furthermore, the tequila market is highly competitive, with the presence of domestic and international brands such as Jose Cuervo, Patron, and Don Julio, among others vying to gain significant market share.

By Distribution Channel Analysis

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Off-Trade Segment to Lead the Market due to its Accessibility and Convenience

Based on distribution channel, the market is classified into on-trade and off-trade.

The off-trade segment is expected to hold a significant share of the North America market. The off-trade segment includes licensed establishments such as liquor stores, supermarkets/hypermarkets, and online stores. The convenience of purchasing these spirits in retail stores or online platforms have contributed to their accessibility and growth in sales. According to the SevenFifty Daily, an online magazine about the beverage alcohol industry, off-premise U.S. mezcal sales recorded an increase of 143% between February 2020 and February 2023. Moreover, the growing interest in craft and premium spirits, the increasing popularity of cocktail culture, and increased at-home consumption has positively impacted the off-trade sales of agave spirits in the region.

REGIONAL INSIGHTS

The U.S. is expected to dominate the market, valued at USD 6.05 billion in 2022. Agave spirits, such as tequila and mezcal, have gained popularity among consumers leading to a surge in their demand in the region. Mezcal has become a staple spirit in the U.S. due to its distinct and smoky flavor. Furthermore, the popularity of cocktails, such as margaritas, martinis, and manhattans, has gained remarkable traction propelling the tequila demand. According to the Distilled Spirits Council of the U.S., sales of agave spirits increased by 30.1% in 2021. Agave spirits have strong cultural ties to Mexico, and the growing interest in Mexican cultures and cuisines in the U.S. has significantly boosted their demand.

Canada is expected to grow at a steady pace in the forecast period. Canada has a significant consumer base that appreciates high-quality spirits contributing to the growth of this market. Tequila has been the dominant agave spirit in the Canadian market; however, mezcal has also gained traction but to a lesser extent.

Mexico is expected to grow at a high CAGR in the forecast as the country has seen a surge in craft and artisanal producers and offers some authentic tequila types, including Blanco(silver), reposado (rested), anejo (aged) and extra anejo. Furthermore, the growing international demand for tequila and mezcal has increased exports and created opportunities for the Mexican spirits market.

KEY INDUSTRY PLAYERS

Focus on Partnership Strategies by Major Companies to Attain the Highest Market Position

Mezcal, a traditional Mexican agave spirit, has been gaining recognition, becoming one of the most demanded spirits among the niche consumer base. The U.S., as the largest consumer market in North America, has been a significant driver of this growth. Therefore, the prominent players in the market are focusing on partnerships, investments, and the foray into the mezcal market to gain a competitive edge in the North America agave spirits market share. For instance, in June 2023, Suntory Holdings Limited., a Japanese multinational brewing and distilling company group, made its foray into the mezcal business through a strategic distribution partnership with the Amarás mezcal brand. The company would import sustainability-focused Mezcal Amarás and distribute its products across several U.S. states.

LIST OF KEY COMPANIES PROFILED:

• Ilegal Mezcal (U.S.)


• El Silencio Holdings, INC. (U.S.)


• William Grant & Sons (U.K.)


• Mezcal Vago (Mexico)


• Rey Campero (Mexico)


• Wahaka Mezcal (Mexico)


• Diageo Plc. (U.K.)


• Revel Spirits (U.S.)


• Casa Cortés (Mexico)


• Campari Group (Italy)

KEY INDUSTRY DEVELOPMENTS:

• May 2023 – Campari Group, an Italy-based beverage company, introduced Mayenda, a new luxury tequila brand, with the launch of Mayenda Tequila Blanco. The new product's labels are made from 100% reclaimed agave byproducts. Mayenda Tequila Blanco is made available in select retailers in Mexico and the U.S.


• April 2023 - Flecha Azul Tequila, a brand of WES Brands, announced the expansion of its additive-free tequila in Mexico. The tequila is available in all five expressions – Blanco, Añejo, Reposado, Cristalino, and Extra Añejo in major states of Mexico.


• April 2022 – Diageo Plc. launched its newest Astral Tequila Blanco under the brand Astral Tequila. The new product is made from 100% Blue Weber agave and is available across North America.


• March 2022 - Lobos 1707, an ultra-premium tequila and mezcal brand, launched its Lobos 1707 Reposado Tequila and Lobos 1707 Joven Tequila in the Canada market.


• February 2022 - Tres Generaciones, a tequila brand owned by Suntory Holdings Limited., launched a new ultra-premium tequila named Añejo Cristalino.

REPORT COVERAGE 

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