Tequila Producers Face a Glut as Mexico’s Output Outruns Demand

Tequila entered 2026 with a split profile that is reshaping the business. Global sales are still rising in value, helped by higher-priced bottles, 100% agave tequila and expansion into new markets. But volume growth has slowed sharply from the pace that made tequila one of the fastest-growing spirits categories from 2019 to 2023. In the United States, which takes most of Mexico’s exports, the category is showing signs of maturity as consumers pull back on alcohol, retailers work through post-pandemic inventories and shoppers become more price sensitive.

Available estimates place the tequila market in 2026 at roughly $12.18 billion to $13.7 billion, depending on whether researchers measure retail sales, shipments to distributors or a mix of at-home and on-premise consumption. Across those methods, the broad picture is the same: value is holding up better than physical sales because premium brands and 100% agave expressions account for a larger share of purchases.

Production data from Mexico, where all tequila must be made under the denomination of origin, show a weaker trend in volume. Certified output reached 651.5 million liters in 2022, then fell to 598.7 million liters in 2023 and 495.8 million liters in 2024. Production stayed near 496 million liters in 2025. From January through May of this year, producers made 248.7 million liters and exported 174.7 million liters. If that pace continued through the full year, output would approach 597 million liters, though that remains an early signal shaped by seasonality, inventory levels and commercial decisions.

The slowdown comes after years of aggressive planting when agave prices were high and demand looked almost automatic. Mexico’s planted agave area rose 167% between 2014 and 2023 to 214,621 hectares across 231 municipalities in 12 states. Only agave grown in the 181 municipalities covered by tequila’s denomination of origin can legally be used for tequila, with Jalisco at the center of the system. Those newer fields took years to mature and reached the market just as consumption began to cool.

That timing has pushed agave prices down hard. After peaking near 32 Mexican pesos per kilogram, prices fell to about five pesos in February 2024. During 2025 and 2026, reported transactions ranged from 0.8 pesos to eight pesos per kilogram. Lower raw material costs help margins for large producers, but they cut deeply into farm income for growers who planted during the boom and now need to sell a perishable crop into a weaker market.

The oversupply is also visible in storage. At the end of 2023, the industry held about 525 million liters in inventory, close to a full year of production. Some of that stock is tequila set aside for aging, but the figure still leaves producers under pressure to move product without setting off a prolonged drop in prices. Promotions have become more common in some brands and markets. The challenge this year is not finding tequila. It is selling it profitably for distillers, distributors and farmers at the same time.

The United States remains the center of gravity. In 2025 it received more than 331 million liters, about 81% of Mexican tequila exports, and it accounts for more than two-thirds of global consumption by volume. In 2024, combined U.S. sales of tequila and mezcal reached $6.7 billion and 32.2 million nine-liter cases. More recent figures point to flat performance and a slight decline in liters in 2026.

That moderation is not affecting every price tier equally. Ultra-premium tequila grew 7% across 2024 and 2025 and now represents 17% of volume, up from 6% in 2019. Superpremium tequila, by contrast, fell 6%. The shift suggests that consumers still want quality but are comparing prices more closely and leaning toward what many companies describe as accessible premium products: bottles with clear origin, strong cocktail use and a price point that supports repeat purchases.

Heavy reliance on the United States helps explain why producers are pushing harder into other markets. Spain imported 7.07 million liters in 2025 and was the largest European buyer among countries with open data. Germany took in 6.66 million liters, Canada 6.15 million, Colombia 4.48 million, France 4.38 million, Japan 3.98 million and Italy 3.76 million. Colombia added about 2.4 million liters from the previous year, an increase of roughly 133%, while India approached two million liters after an annual gain of 80%.

Exports are also shifting toward higher-value product. Of total shipments last year, 278.62 million liters were 100% agave tequila and 129.37 million liters were standard tequila. The first category represented 68.3% of exports, supporting average value per liter and reinforcing tequila’s image as an origin-driven spirit. The denomination of origin and Mexico’s NOM-006 standard protect the name and provenance of tequila, but they also mean production cannot be moved abroad when agricultural or supply problems emerge.

Brand performance shows how uneven growth has become inside the category. José Cuervo remained the leader in 2024 with 8.9 million nine-liter cases sold, though that was down 6.4%. Don Julio reached 4.4 million cases, up 28.2%. Patrón fell 11.8% to 2.8 million cases, Casamigos dropped 20.7% to 2.4 million cases and Espolòn rose 14.6% to 1.8 million cases.

Becle, owner of José Cuervo, 1800, Gran Centenario and Maestro Dobel, still has the largest platform in tequila. In 2025 it sold 24.287 million cases across all categories. José Cuervo accounted for 35.3% of the group’s volume, but its other tequila brands contributed a larger share of revenue relative to volume, underscoring the importance of having labels at several price points. Diageo posted sharply different results between Don Julio and Casamigos, while Brown-Forman reported a 6% organic decline in its tequila portfolio during its fiscal year ending in 2026.

Sales continue to split between retail channels and hospitality venues, though estimates differ on how much each side represents because measurement methods vary widely by market and source. Grocery stores, liquor chains specialty shops and e-commerce support repeat household purchases, while bars restaurants and hotels remain critical for margaritas mixed drinks and expensive bottle service that shape brand image.

Much of the recent innovation is happening in ready-to-drink products, flavored offerings and single-serve formats aimed at convenience and lower alcohol occasions. In the United States, spirit-based ready-to-drink products rose from 8% of category volume in 2021 to 18% in 2024. José Cuervo introduced new canned products this year, Casamigos launched prepared margaritas in 2025 and El Jimador entered the segment this year with mango lime and orange spritzes.

Regulation has added another layer of uncertainty. Since 2024, Mexico’s Tequila Regulatory Council and government authorities have been disputing use of the English phrase “additive free,” which some brands use to signal that no additives were included in production. Regulators argue that such claims can mislead consumers if they have not been verified by the proper authority. In 2025, a campaign linked to Patrón led to a temporary export blockage and the dispute reached U.S. courts.

Trade policy remains another risk for an industry so dependent on one market. In 2025 there was discussion of a possible25% tariff on Mexican goods including tequila. As of July this year, products that comply with rules under the United States-Mexico-Canada Agreement remain exempt under the base-case scenario followed by most companies in the sector. Any revision to that framework or any new border measures would hit quickly because four out of every five exported liters go to the United States.

Environmental pressure is also becoming part of business planning. One study estimated that a700-milliliter bottle of reposado tequila can generate about2.27 kilograms of carbon dioxide equivalent over its life cycle. Bottling distillation cooking and cultivation account for much of that footprint along with water use energy herbicides and fertilizers. Companies and research centers are testing packaging materials made with agave bagasse, while some programs allow part of agave fields to flower to support bat pollination and preserve genetic diversity.

Forecasts through 2028 now depend largely on how quickly inventories come down and whether U.S consumers return to stronger buying patterns. Under a moderate scenario with flat demand in the United States gains in Mexico Colombia Japan and India and a larger share for100% agave products analysts see a market worth about $13.68 billion and close to621 million liters by 2028. A stronger recovery tied to ready-to-drink products and faster expansion across Asia and Latin America would lift those figures to about $14 .47 billion and646 million liters as producers try to balance planting promotions pricing and new launches without pushing all of today’s oversupply pressure onto growers.ย