California grape growers convert vineyards to agave

California grape growers and winemakers, squeezed by weaker wine demand and tighter water limits, are increasingly turning to agave as they search for a crop that is cheaper to maintain and may support a new category of spirits made in the state.

The shift is still small, but it is spreading from boutique operations to larger commercial producers. It comes at a difficult moment for California wine, where falling sales, excess grape supply and higher operating costs are pushing some growers to pull out vines or leave fruit unharvested. It also reflects a broader change in the drinks business, where wine has lost momentum while tequila has held up better than many other alcohol categories.

Stuart Woolf, a second-generation farmer in Huron, is among those making the bet. He has planted about 550 acres of agave over the past four years and plans to add another 150 acres. Woolf said the crop offers a possible way to keep farming on his family’s land, protect jobs and work around strict water-use limits that affect much of his 30,000-acre operation.

Agave, the spiky succulent used in Mexico for tequila and mezcal, costs less to plant and cultivate than grapes and needs less water and maintenance. For growers in dry parts of California, those advantages are central. Steve Vierra, a soil scientist and consultant who has worked in California wine country for nearly 30 years, said planting agave costs about $10,000 per acre. Converting land back to grapes can cost as much as $70,000 per acre, depending on the region. Once established, agave can largely survive on natural rainfall, while vineyards require more irrigation.

That lower cost does not make the move safe. Agave takes time to mature, usually five years or more, which means growers are making decisions now for a market that may look very different by the time the plants are ready to harvest. Vierra described agave as a speculative crop and said distillers are not offering pre-planting contracts that would give farmers more certainty.

There are also signs of the same boom-and-bust risk seen in other farm commodities. Agave prices in Mexico have recently fallen sharply after a period of strong expansion, a reminder that rapid planting can lead to oversupply. That is a concern in California as well, especially because the state still has limited capacity to process large volumes of agave into spirits.

The problems facing wine growers are more immediate. Wine sales fell 5% last year, the steepest decline among alcoholic beverage categories, according to Circana data compiled by Bloomberg Intelligence. The category still generates more than $15 billion a year through Circana’s tracked retail channels, but it has not grown since at least 2022. Dale Stratton, managing director of alcohol industry consulting firm Azur Associates, said some growers are now removing vines or allowing crops to spoil because demand is too weak to justify the harvest. Labor and other operating costs have added to the pressure.

By comparison, tequila has remained relatively resilient. In the 52 weeks ended Sept. 9, tequila sales were flat, while vodka, whiskey and other liquor categories each declined by at least 1.5%, according to the Bloomberg report citing market data. Mexico’s tequila exports to the United States rose about 30% by volume from 2020 through 2025, despite a roughly 1% decline last year, according to Mexico’s Tequila Regulatory Council.

That contrast is shaping growers’ thinking. Woolf said California’s large population and strong consumer interest in agave-based spirits helped persuade him to plant the crop. He also pointed to the state’s Latino and Hispanic population as part of the local market logic for an agave spirits category produced closer to home.

Still, California producers cannot market these spirits as tequila or mezcal. Those names are protected by denomination-of-origin rules tied to Mexico. Any alcohol made from California-grown agave must use a different label and build its own identity with consumers. That has left producers trying to balance inspiration from Mexican spirits with a separate product definition.

Gian Nelson, co-founder of Napa-based Jano Spirits, said producers are using that constraint to experiment rather than imitate. Without being tied to a fixed production tradition, distillers are testing different approaches to develop a California expression of agave spirits.

The effort is beginning to move beyond trial plots. Vierra said he has helped more than 20 wineries convert part of their land from grapes to agave. He said the trend started with smaller operations but is now reaching more commercial farms.

Large companies are paying attention as well. O’Neill Vintners & Distillers, which produces about 8 million cases of wine a year and owns brands including Line 39 and FitVine, has been testing California agave. Matt Towers, the company’s chief operating and financial officer, said O’Neill has spent about $300,000 on equipment imported from Mexico to cook, process and distill agave spirits, and expects to double or triple that investment over the next year. Founder and Chief Executive Officer Jeff O’Neill said the company is still focused on refining the product and does not expect it to reach store shelves until 2028. The company has planted about seven acres of agave for its own supply.

O’Neill said most of the agave now planted in California is expected to be harvested in the next two to three years. That timing matters because the industry’s immediate challenge is not only growing the crop but also building enough processing capacity to handle it.

Turning agave into liquor is labor-intensive. The leaves must be cut away to expose the core, or piña. The cores are then cooked for a long period, crushed to extract juice, fermented and distilled. California has only a small number of operators equipped to do that at commercial scale.

Connor Vaccaro, founder of Calavé Spirits and also a winemaker, said he is likely one of the few producers in the state with equipment large enough to handle bigger volumes. He said the distilling side of the business is still trying to catch up with planting activity and that he hopes to expand over the next couple of years. Vaccaro is now on his fourth production run and said customers have responded well to his blanco and reposado styles once they taste them.

Consumer education remains a major hurdle. Vaccaro said many buyers understand the product better when it is explained as a distinction similar to the one between sparkling wine and Champagne: related, but not the same. The larger commercial challenge, he said, is less about convincing people on flavor than making them aware that agave spirits are being produced in California at all.

The idea itself is not entirely new. Craig Reynolds, who once served with Woolf on the board of the California Agave Council, first planted agave in 2014 and worked with small distillers to make spirits from his crop. Those early efforts helped show that agave could be grown and processed in California, though the market remained small.

Mexico’s spirits industry is now watching California closely to make sure protected names are not misused. Tequila exports generate more than $4 billion a year for Mexico, according to a 2025 report from the World Spirits Alliance, an industry advocacy group.

For the broader beverage business, the shift has potential implications beyond a handful of farms. If more vineyard acreage moves into agave, grape supply in some areas could tighten over time, while a new domestic agave-spirits segment could compete for distributor attention, retail shelf space and consumer spending that now goes to wine and imported agave products.

For now, however, the biggest question is whether California can build enough distillation capacity and market recognition before a wave of newly mature agave reaches harvest. Producers say the product can find buyers, but only if the state can turn more of its crop into finished spirits and get those bottles into consumers’ hands.