Mexico eyes huge potential tequila market in China

MEXICO CITY—Mexico wants China to loosen up and have a little tequila.

Actually, lots of it.

Since China President Xi Jinping and Mexico’s Enrique Pena Nieto broke a diplomatic and economic chill and agreed to boost trade, tequila producers have been gearing up to make the world’s most populous country their second-biggest market, after the margarita-loving U.S.

The drink synonymous with Mexico already is available in more than 100 countries. But export of the alcoholic beverage to China has been limited by legal and sanitary restrictions.

Chinese authorities changed their rules last week, deciding that the purest and best tequila, known as blue agave, has no detrimental health effects. That has opened the door for businesses in both countries to begin promoting and exploring ways to sell more tequila.

With the purchasing power of 1.3 billion Chinese, tequila producers see a niche market, especially among the emerging upper class.

“The potential of this industry is that in five years, we can reach 10 million litres in exports,” said Ramon Gonzalez, director of Mexico’s tequila promotion council. “Today’s new rich are in China.”

Until the change by health authorities last week, the Chinese couldn’t drink the good stuff made famous by swilling cowboys in many a western on the big screen.

Because of restrictions on methanol per litre of alcohol, China had only allowed the import of lower quality tequila made with 51 per cent agave sugar, the rest of the sugar a mix from other plants. The methanol content in blue agave tequila was considered too high.

Mexico exports a total of 43.7 millions of gallons (165.7 million litres) of tequila, with 80 per cent of the bottles going to the U.S. Little more than 108,000 gallons (410,250 litres) go to China.

Former President of Mexico Felipe Calderon indicated in 2010 that the Chinese were willing to lift their restrictions and allow import of 100 per cent blue agave tequila. But when Calderon left office last year, that still had not happened and relations had cooled after his meeting with exiled Tibetan spiritual leader the Dalai Lama.

During Xi’s visit to Mexico earlier this month, the countries agreed to try to level their trade imbalance, which favours China 10 to 1.

The Asian country’s economy is forecast to slow some this year, but at 7.75 per cent growth, it remains robust by all standards.

China’s ruling Communist Party is trying to reduce the country’s reliance on exports and investment and nurture more self-sustaining growth based on domestic consumption. That includes trying to encourage more consumer spending on restaurants, a key driver of liquor sales.

Still, tequila producers may run into the Chinese policy of doing whatever it takes to protect national products from foreign competition, Shanahan said.

In other words, they should take the promise of an open market for tequila with a lime and pinch of salt.

Beer is by far the most popular alcoholic beverage in China, which accounts for more than half of global consumption

Associated Press writer Joe McDonald in Beijing contributed to this report.

© 2013 The Canadian Press