14th July, 2017 by Tess Rose Lampert

It is “absolutely possible” to scale up traditional mezcal production “without changing the quality”, Del Maguey global mezcal ambassador Steve Olson has said, as the dust settles on Pernod Ricard’s recent stake in the brand.

*This article was first published in the July edition of The Spirits Business magazine

The mezcal category continues to grow dramatically. Nearly 400% of its 500% growth has come in the past five years, and in 2016, Mexico exported 2.7 million litres, compared with just under 648,000 in 2011, according to the Regulatory Council of Mezcal (CRM). Mezcal may still be a small piece of the spirits pie, but its ability to capture the interest of beverage industry professionals and consumers has made it an attractive target for investors and multinationals. It is an appeal we witnessed last month when Pernod Ricard took a majority stake in Del Maguey Single Village Mezcal.

“We’re thrilled,” said Jeff Agdern, senior vice­-president at Pernod Ricard’s New Brand Ventures division, which made the investment. “Mezcal is a small but growing and exciting category in the US and has been on our radar for a long time. I don’t think you could find a more authentic brand and story than Del Maguey.”

The brand was established in 1995 by mezcal pioneer Ron Cooper. He visited the agave farmers, or palenqueros, and brought their products back to America before the market knew what it was. This philosophy explains in part why the acquisition is sending shockwaves through the agave community.

It is a deal that has sparked diverse reactions. When other brands, such as Ilegal and Unión, partnered with Bacardi and Diageo respectively, people took note. But this corporate move from an artisanal brand, often considered a ‘craft’ benchmark in the sector, has raised concerns about the future of traditional mezcal.

Sourcing and distribution

In a highly political micro-­industry, few wish to speak out on a deal that could have profound ramifications for the sector, on everything from sourcing to distribution. But Eduardo Belaunzaran, managing partner of Wahaka Mezcal, is one of just a few brand owners to give a voice to these concerns.

“The acquisition by the French giant should concern all the industry,” he says. “For years, some people in the industry told us how perverse it is for the brands in the agave sector to be bought out by a big distributor. One of the arguments is the potential sacrifice of the quality of the product – I happen to share this concern.”

But Belaunzaran recognises that: “At the end of the day, mezcal isn’t only culture and tradition, it is also a business that feeds a lot of families, including my own. All the mezcal brands are looking for profits. I’m happy for Del Maguey, Unión, Ilegal, Sombra, and others to come, for their success in selling their brands. The mezcal sector will be affected positively by this investment. But are we talking about quality?”

The quality of Del Maguey’s mezcal stems from its respect for the families who practise traditional agave farming methods. For now, Agdern insists this won’t change. Part of the Pernod Ricard strategy is to “leave the management teams that have made the brand successful in place. The relationship with the producers won’t change,” he states. Pernod Ricard says the only immediate change for Del Maguey will be to widen the brand’s distribution network. It is a move that brings opportunities for both consumers and wider artisanal mezcal brands, says Misty Kalkofen, a Madrina, or ‘godmother’, of Del Maguey, and a bartender.

“Pernod Ricard has a wide distribution, and is focused on education,” she explains. “The healthy growth of the mezcal category was based around having an educated consumer. People only have industrialised mezcal available to them, and for most people that ends up being a negative experience. We can provide something of quality to change perceptions. That will lead people to want to try other options.” alkofen also thinks that as Del Maguey moves up, its current distributors will have a gap in their portfolios for other ‘craft’ names.

Sustainability issues

By definition, ‘artisanal’ mezcal is a small­-batch product, and makers rely on a source material that takes from five to 30 years to reach maturity. “There is already an agave crisis going on,” says Nicolas Palazzi, owner of PM Spirits, which distributes artisanal mezcals. “I don’t see how having powerful financial players taking part in the mezcal game will help alleviate the pressure on the agave supply. Brands owned by larger companies will have more ability to afford the raw material, and will likely use a serious chunk of agave resources.”

This shift in purchasing power presents a possible dissolution of brands that rely on buying in their agave, and puts pressure on families that use their own cultivated plants. “The tiny mezcalero may end up having more incentive to sell agaves to the highest bidder than to make their own distillates, leaving the medium­-sized grower­-distillers in the best position to survive,” Palazzi says.

What large companies do with their agave stock is another issue, admits Steve Olson, global mezcal ambassador for Del Maguey. “A lot of companies are scaling up production, and we assume it’s mostly industrialised,” he reckons. It is this trend of industrialisation that causes Wahaka Mezcal’s Belaunzaran to assert: “We can’t keep the same quality when we are increasing quantity.”

Unsurprisingly, Olson offers a different perspective, and claims this is “one of the many reasons I’m thrilled to have this partnership [with Pernod Ricard]. Suddenly, the balance of power has shifted because we made a deal with a company that is like­-minded and believes in what we do.”

Over the years, Del Maguey has invested heavily in full­-spectrum sustainability, and supporting the growing communities has been an integral part of its plan to grow in a way that meets rising demands. Olson is adamant this won’t change. “It is absolutely possible to scale up doing it the traditional way and without changing the quality,” he says. “We’ve proven that with Vida [one of its expressions]. You have to add to your production facility. What changes is the amount of agave, equipment, and the number of people.”

The hope is that it will be possible to create long-­term sustainable communities that are able to grow alongside the mounting demand for artisanal mezcal. Artisanal brands believe that to accomplish this, a proper flow of funding is needed. “We need to pay better salaries, invest in having better palenques, and we should be replanting more, and taking better care of the environment,” says Belaunzaran.

Del Maguey’s Kalkofen expects that the partnership with Pernod Ricard, a company that can provide the necessary financial support, will see the brand lead by example when it comes to sustainability.

It’s too early to tell exactly how this unique deal will influence the world of mezcal. Legitimate concerns remain central to the discussion, but some, like Nicolas Palazzi, remain optimistic: “The mezcal market is unsustainable right now; it needs to be cleaned up. This deal may be start of it.”