Diageo and Patron Set Their Sights on China

Up until recently the only tequila Chinese consumers were able to purchase was mixto tequila. However, in June of this year, China’s President Xi Jinping and his Mexican counterpart Enrique Peña Nieto signed a bilateral trade agreement that will allow Mexican imports of 100% agave tequilas into China for the first time since 2008.

China banned high-end tequilas in 2008 because of the relatively high methanol levels (more than two grams of methanol per litre) found in tequila made with 100% agave, methanol is a small byproduct of the agave distillation process. It was part of a bigger legislative move to address the rising incidence of methanol poisonings in the country, many of which had been caused by the consumption of fake alcohols, often made with toxic amounts of methanol. The country has, however, continued to let in lower-end tequilas, or tequila mixtos, which only contain 51% agave, and therefore less methanol.

Both Diageo and Patron have welcomed the lifting of China's ban on high-methanol tequila and hope to capitalise on the market's projected growth. China is expected to become the world's second-biggest tequila market within five years now the restrictions have been removed, according to Mexico's National Chamber for the Tequila Industry. The group anticipates annual export levels to mainland China to reach 10m litres by 2018.

If these predications are accurate, China would go from being the world’s 23rd largest tequila importer to its second largest in five years, with tequila supplanting Whisky and cognac as China’s spirit of choice. Even then, China would rank far below the world’s largest tequila consumer, the United States, which imports around 130m litres annually, followed by Germany where the market is around 7m litres per year.

Pointing to the predicted boom in the market, a spokesperson for Don Julio stated the the brand would be "well positioned to take advantage of this growth", however did not directly comment on when Don Julio might be introduced to China. Patron Spirits went a step further and confirmed this week that it plans to launch its full portfolio in China soon. "Product is on its way," a company spokeperson said. "Our focus will begin with the major hubs - Shanghai, Beijing - and we'll grow from there."

Ten tequila brands are already sold in China - including Jose Cuervo, Pepe Lopez,  Camino Real, Pernod Ricard's Olmeca Altos and Proximo's 1800, all of which currently meet the country's methanol regulations.

Source(s): Quartz/Yahoo Finance/just-drinks